Global oil prices decline amid increase in fuel inventories

WEB DESK: Oil prices declined on Thursday as investors assessed the implications of a delayed interest rate cut by the US Federal Reserve and an unexpected increase in US crude and fuel inventories.

By 1207 GMT, Brent crude futures had dropped 60 cents, or 0.7 per cent, to $82 per barrel. Similarly, US West Texas Intermediate (WTI) crude futures fell 68 cents, or 0.9 per cent, to $77.82 per barrel. This downturn followed a nearly 1 per cent gain in both benchmarks during the previous trading session.

The Federal Reserve opted to maintain current interest rates on Wednesday, indicating that any policy easing might not commence until December.

According to PVM Oil analyst Tamas Varga, “In the Fed’s view, this is the price that needs to be paid to achieve a soft landing and avoid recession beyond doubt.” Higher borrowing costs typically suppress economic growth, which in turn can reduce oil demand.

Fed Chair Jerome Powell stated in a press conference after the central bank’s two-day policy meeting that inflation had decreased without severely impacting the economy. He added that there was no reason to believe this trend couldn’t continue.

On the supply front, US crude stockpiles rose more than expected last week, primarily due to a surge in imports. Fuel inventories also increased beyond projections, as reported by the Energy Information Administration on Wednesday. This increase in supply has contributed to the downward pressure on oil prices.

Additionally, a bearish report from the International Energy Agency highlighted concerns about potential excess supply in the near future, further weighing on the market.

Geopolitical factors also influenced oil prices. Traders are closely monitoring ceasefire negotiations in Gaza, which, if successful, could alleviate fears of disruptions to oil supplies from the region.

Meanwhile, Iran-backed Houthi militants claimed responsibility for an attack on a Greek-owned coal carrier near Yemen’s Red Sea port of Hodeidah.

This incident is part of a series of assaults on international shipping in the Red Sea, which the militants have conducted in solidarity with the Palestinians amid the Israel-Hamas conflict.

US Secretary of State Antony Blinken mentioned that Hamas had suggested numerous amendments to a US-backed ceasefire proposal, but affirmed that mediators remained committed to bridging the gaps in the negotiations.

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