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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Oil Prices Set For A Weekly Loss As Higher-For-Longer Rates Trump Tight Market

  • As of Friday morning, oil prices were on track for a small weekly loss after the Fed indicated interest rates could remain higher for longer.
  • Coming off the back of three weekly gains amounting to a total of 10%, profit-taking and economic fears cooled off the rally.
  • Russia’s decision to restrict fuel exports added upside pressure to oil prices and oil market fundamentals remain bullish.
oil

Oil prices were on track to post a small weekly loss early on Friday after the Fed signaled this week that interest rates could remain higher for longer, although it skipped a rate hike at its latest meeting.

In Asian trade on Friday, WTI Crude was up by 0.62% at $90.19 and Brent Crude rose by 0.44% to $93.74.

Both benchmarks were on track for a small weekly decline, following three weeks of weekly gains, in which prices had jumped by a total of 10% and hit the highest levels since November 2022.

Oil prices rose at the start of this week, buoyed by signs of tightening crude and fuel markets and additional draws in U.S. inventories, but the Fed put the brakes on the rally on Wednesday after signaling interest rates could be kept at higher levels for longer.

As widely expected, the Fed paused the interest rate hikes at its September meeting but signaled that with inflation remaining elevated despite a fairly strong economy there may be another rate hike later this year.

“Higher for longer was the key message” from the FOMC meeting, which has weighed on risk assets, including crude oil, ING strategists Warren Patterson and Ewa Manthey said on Thursday. 

Even with the pause in hikes this month, the Fed sent a hawkish message.

Economic concerns in Europe could also weigh on oil prices in the near term, according to Tina Teng, market analyst at CMC Markets.

“Mounting fears of a recession in the Eurozone could continue pressuring oil prices,” Teng wrote on Thursday.

Profit-taking after the recent rally has also weighed down on oil prices this week.

However, on Thursday, oil prices got a boost from Russia’s decision to temporarily restrict exports of diesel and gasoline as Moscow aims to stabilize domestic fuel prices.

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By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on September 22 2023 said:
    This isn’t a given since the robustness of the global market fundamentals have much stronger impact on the market and prices than a hike by the US Federal bank.

    A powerful bullish factor is that the China-led Asia-Pacific region comprising half of the global economy is growing at such high rates that could overwhelm whatever hikes the Federal Bank comes up with.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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