Crude oil prices rose by about 2%, at the end of trading today, Wednesday, March 22 (2023), with the decline of the US dollar.
US oil inventories rose over the past week, contrary to analysts’ expectations, limiting price gains.
The US Federal Reserve decided to raise interest rates by 25 basis points, for the ninth time in a row, but hinted that the monetary tightening cycle is nearing the end.
Crude oil prices fell earlier in the day after an unexpected rise in UK inflation in February, raising fears of further interest rate hikes a day before the Bank of England announces its latest interest rate decision.
Crude oil prices today
At the end of the session, the prices of benchmark Brent crude futures – for May 2023 delivery – rose by about 1.8%, to reach $76.69 a barrel.
The price of US West Texas crude futures – for May 2023 delivery – increased by 1.8%, to $70.90 a barrel, according to data seen by the specialized energy platform.
Crude oil prices ended their trading, yesterday, Tuesday, March 21, with an increase of about 2.5%, in an attempt to compensate for some losses after a week of banking unrest, which cast a shadow on the markets.
US oil stocks
Today, Wednesday (March 22), the weekly report – issued by the US Energy Information Administration – revealed that US crude stocks increased by 1.1 million barrels, during the week ending March 17, 2023, bringing the total to 481.2 million barrels.
The rise in US oil inventories came with the decline in crude imports and exports, as US oil exports fell by 95 thousand barrels per day, bringing the total to 4.932 million barrels per day, and imports decreased by about 45 thousand barrels per day, to reach 6.172 million during the past week.
Yesterday, Tuesday, data from the American Petroleum Institute showed that US crude stocks rose by about 3.3 million barrels in the week ending March 17.
This defied expectations of 8 analysts polled by Reuters for a decline of about 1.6 million barrels.
US interest rates
“With risk aversion subsiding, stock markets positive and the dollar weaker, crude oil prices have managed to recover further,” said UBS analyst Giovanni Stonovo.
A weak dollar boosts demand for oil because it makes the commodity cheaper for those who hold other currencies.
The Federal Reserve raised interest rates by 25 basis points on Wednesday, in line with expectations, stressing the strength of the US banking system.
A pause in interest rate hikes may help fuel economic activity, thus increasing fuel demand.
Ahead of the decision, OANDA chief market analyst Craig Erlam said: “It would be quite a shock if the Fed went back to hiking rates now considering everything that happened over the last two weeks.”
Oil market conditions
Crude oil prices recorded their biggest decline in months last week, after the failures of prominent US banks that began on March 10, and a crisis at Credit Suisse in Europe.
An emergency rescue by Credit Suisse over the weekend helped crude oil prices rebound, according to data seen by the specialist energy platform.
OPEC+ officials, hedge fund managers, and oil market participants have described the recent drop in crude oil prices as speculative, and insist that increased demand will drive prices higher in the coming months.
ANZ analysts said that major traders see underlying oil issues as driving prices higher, noting that there are concerns that supply could be hit more than demand amid the banking crisis.
They added that US shale oil production is most at risk of tightening credit conditions from US regional banks.
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