After the European Central Bank (ECB) decided on Thursday to slow the pace of its interest rate hike, the price of crude oil was largely stable, with Brent futures rising by 9 cents or 0.12% to $72.42 per barrel and the US West Texas Intermediate (WTI) falling by 13 cents or 0.19% to $68.47 per barrel.
Since oil prices have fallen more than 9% due to worries about demand in major consumer countries, this could hardly scratch the surface.
After a shaky start to the week, prices deteriorated as a result of a quarter-point increase in interest rates by the US Federal Reserve. This pressured oil prices as traders feared that slower economic growth may affect energy consumption.
Since March 2022, the US central bank has increased interest rates eleven times in a row, bringing its benchmark overnight rate to a range between 5.00% and 5.250%.
In order to combat the euro zone’s persistently high inflation, the ECB slowed the tempo of its interest rate increases while keeping its options open.
The ECB’s three policy rates had their smallest increase—25 basis points—since it started raising them last year.
The market will also be troubled by worries about the US economy and indications of sluggish manufacturing expansion in China, the world’s top oil importer.
In order to allow the American government time to examine the effects of recent bank failures and to get clarity about the dispute over raising the US debt ceiling, the US central bank has signaled to the market that it may postpone further interest rate rises. This signal has received some support from the market.
Beginning in the first week of May, the Organization of the Petroleum Exporting Countries (OPEC) and its allies—including Russia—started voluntarily reducing their output.
Alexander Novak, the deputy prime minister, declared on Thursday that Russia was upholding its voluntary commitment to reduce oil production by 500,000 barrels per day from February through the end of the year.
Large inventory decreases during the past few weeks have not been able to stop severe price losses, despite the fact that US inventories and oil prices have a strong inverse relationship, with dropping stockpiles pushing prices upward and growing inventories having the opposite effect.
The Energy Information Administration (EIA) stated this week that crude oil stockpiles had yet another weekly inventory decline.
Comparatively to the previous week’s draw of 5.1 million barrels, the EIA calculated that stockpiles had decreased by 1.3 million barrels over the time.
