Oil prices increased on Thursday, continuing the gains made during the previous session, backed by a larger-than-expected weekly decline in U.S. crude inventories and a drop in the dollar after the Federal Reserve hinted it would start reducing borrowing costs in 2024. Brent crude futures rose by $1, or 1.3%, to $75.26 per barrel by 09:00 GMT. West Texas Intermediate (WTI) crude increased by 80 cents, or 1.1%, to $70.27.
Tina Teng, an analyst at CMC Markets, noted in a client memo, "Crude oil prices bounced back before the Fed meeting and gained further after it." The dollar fell to a new four-month low today after the latest economic forecasts from the U.S. Federal Reserve indicated that the interest rate hike cycle may be over and that borrowing costs could decrease in 2024. Fed Chairman Jerome Powell stated on Wednesday that the unprecedented tightening of monetary policy is likely at an end.
Lower interest rates reduce consumer borrowing costs, potentially boosting economic growth and oil demand. A weaker dollar makes oil less expensive for foreign buyers. Prices rose in the previous session amid concerns over oil supply security in the Middle East following an attack on a tanker in the Red Sea. Teng added that prices were also supported by a larger-than-expected decline in U.S. crude inventories.
The U.S. Energy Information Administration reported that energy companies withdrew a larger-than-expected 4.3 million barrels of crude oil from inventories during the week ending December 8, coinciding with a decrease in imports. Since OPEC+ announced a new round of production cuts on November 30, Brent crude futures have fallen by about ten percent.
