The US crude oil benchmark, West Texas Intermediate (WTI), fell well below the $80 mark it surpassed earlier this week, with Brent crude also losing ground around $82 a month. barrel as inflationary concerns once again took center stage.
As of 1:45 p.m. ET on Wednesday, WTI was trading down 0.92% on the day at $77.94, while Brent crude was trading down 0.81% at $82.21 on the day. barrel.
The Federal Reserve put a damper on oil prices on Tuesday by suggesting it wait months longer before implementing rate cuts as inflation figures fail to paint a clear picture.
The Fed is looking for indications that inflation is on track to fall to 2% ahead of any rate cuts that analysts had hoped would come as early as June or July.
“Federal Open Market Committee (FOMC) minutes will be scrutinized for the Fed’s assessment of erratic inflation in the first quarter and clues on the timing and magnitude of potential interest rate cuts in 2024,” ANZ analysts said in a report cited by Reuters on Wednesday.
Lower interest rates generally reduce borrowing costs and often lead to increased industrial activity and, therefore, energy consumption.
Interest rates continue to fall, but the decline is not fast enough for analysts to be confident of a rate cut this summer. At the same time, the Fed’s reluctance to cut rates essentially helps keep inflation high by curbing consumer spending.
Last week, economic data presented very mixed signals for crude oil traders, with the producer price index (PPI) increasing by 0.5% in April, indicating inflationary pressure, contrasting with the Consumer Price Index (CPI), which met expectations with a slight increase. Increase of 0.3%, suggesting a slowdown in inflation.
Oil prices are reacting to these mixed inflationary signals, amid perceptions among analysts of weakening demand. Speaking to traders and analysts earlier this week, Reuters reported that refiners were buying less crude, while they were expected to buy more due to increased refining capacity .
By Tom Kool for Oilprice.com
More important reading on Oilprice.com:
