Tuesday's oil prices were mixed as concerns about low supply resulting from a strike in…
On supply concerns, oil prices rise, but demand issues continue.
Oil prices recovered on Thursday after both benchmarks had dropped by about 5% in earlier trade as supply issues brought on by Iran seizing an oil tanker and escalating tensions between Russia and Ukraine overshadowed demand issues resulting from the US Federal Reserve’s (Fed) decision to further lower interest rates.
At 10:41 a.m. local time (07:41 GMT), international benchmark Brent crude was trading at $73.33 per barrel, up 1.38 percent from the previous trading session’s closing price of $72.33 per barrel.
The American benchmark West Texas Intermediate (WTI), which closed the previous session at $68.60 per barrel, was trading at $69.33 per barrel at the same time.
Prior to the US Federal Reserve’s announcement of its new monetary strategy, oil prices came under pressure as the world’s largest consumer of oil struggled with high inflation.
However, after Iran’s Islamic Revolutionary Guards Corps (IRGC) confirmed the capture of a foreign oil tanker in the Strait of Hormuz, demand worries were allayed.
The oil ship is being held for an unknown reason, despite the IRGC referring to it as a “violator.”
Following an encounter with an Iranian vessel, the Marshal Islands-flagged “transgressor” tanker was seized by the Iranian army’s naval division and directed to the coastal waters of Iran in the Sea of Oman on Wednesday.
Supply worries increased when the Kremlin said two Ukrainian drones attempted to assassinate Russian President Vladimir Putin overnight on Wednesday. The Kremlin described the attack as a “terrorist” assassination.
While Russia confirmed it had started a criminal case for the alleged drone attack by Ukraine, Ukraine denied any involvement in the attack on the Kremlin.
Increasing demand issues
Despite growing investor concerns about a probable reduction in US oil demand being allayed by a drop in US commercial crude oil stockpiles, oil prices began to rise later on Wednesday in response to the US Federal Reserve’s much-awaited interest rate announcement.
Inflation has “moderated somewhat” since mid-2022, according to US Federal Reserve Chair Jerome Powell, but “pressures run high.”
Powell made his remarks after the Fed raised interest rates by another 25 basis points, bringing the federal funds rate target range to its highest level since August 2007.
Powell emphasized that tighter conditions are probably going to have an impact on the economy, employment, and inflation, but that the exact nature of those effects “remains uncertain.”
He did, however, issue a warning, noting that the Federal Open Market Committee (FOMC) is ready to take additional action if necessary, up until the Fed achieves its 2-percent inflation target.
“No decision was made today to suspend (rate hikes). In the meeting in June, we will discuss that issue, Powell said.
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