Oil prices rise ahead of US interest rate decision
Oil prices climbed more than one per cent today as investors await the latest interest rate decision from the US Federal Reserve.
Brent Crude has risen 1.69 per cent to $86.46 per barrel, while WTI Crude has surged 1.76 per cent to $82.45 per barrel ahead of the meeting – which will be revealed at 1800 GMT today.
The Fed is widely expected to hold rates steady – at 5.25 to 5.5 per cent – an encouraging sign that its battle against inflation has finally eased.
Meanwhile, inflation in the Eurozone has fallen to its lowest level in two years, while the Bank of England is also expected to hold rates tomorrow.
This could be enough to power a further price surge, with both major benchmarks boosted by fears over instability and supply disruption amid escalating conflict in the Middle East between Israel and Hamas.
Callum Macpherson, head of commodities at Investec, noted that “remain high across the region” with the Israel’s war with Hamas entering the ground invasion phase, which “could increase the chances of escalation.”
He said: “Saudi Arabia’s military has reportedly gone into a state of high alert due to clashes with Yemen’s Iran-backed Houthi rebels, and the Israeli military has deployed missile ships to the Red Sea yesterday to ‘strengthen the defence effort in the area.
“There have also been exchanges of fire between Israeli forces and Hezbollah across the Lebanese border. So, it might be premature to downplay the risks of the war.”
However, there are also reasons to question future price surges with US output particularly robust.
Crude oil inventories in the country rose 1.3m barrels last week, while fuel stockpiles fell just 360,000 barrels, according to reports from news agency Reuters.
Elsewhere, China’s sluggish revival from the pandemic continues, with the world’s largest oil importer suffering contracting factory activity last month.
He said: “What seems clearer though, is that if there is no escalation or other threat to output from the war, oil will struggle to sustain prices around recent highs without support from OPEC+ into 2024, making their meeting later this month crucial.”