By Adedapo Adesanya
The Brent crude grade appreciated by 1.6 per cent or $1.51 on Wednesday to $96.16 per barrel despite the United States Federal Reserve raising interest rate for the fourth time this year.
The oil market held its rally even as stocks fell and the dollar rallied after Federal Reserve Chair Jerome Powell said it was premature to think about pausing rate increases. This did not have a negative effect on the market as the West Texas Intermediate (WTI) crude gained 1.8 per cent or $1.63 to quote at $90.00 per barrel.
Yesterday, the US central bank boosted interest rates by 75 basis points to bring down consumer inflation that has reached a four-decade high, though it signalled future increases might be in smaller increments.
The policy decision set the target federal funds rate in a range between 3.75 per cent and 4.00 per cent, the highest since early 2008.
Mr Powell said that change in pace could come as soon as the central bank’s next meeting in December, but he also cautioned that there remains extensive uncertainty about how high rates will need to go, and they could well end up being higher than policymakers had estimated at their last meeting in September.
The market was supported by another decline in US oil inventories as refineries picked up activity ahead of the winter heating season.
The Energy Information Administration (EIA) reported an inventory draw of 3.1 million barrels for the week of October 28.
At 436.8 million barrels, inventories were some 3 per cent below the five-year average for this time of the year, the EIA also said. A week earlier, it had estimated an inventory build of 2.6 million barrels.
This week, oil has been on the rise thanks to a weaker greenback and hopes that China may soon amend its zero-Covid policy, according to unverified reports on social media.
The European Union’s embargo on Russian oil is set to start on December 5. The ban, a reaction to Russia’s invasion of Ukraine, will be followed by a halt on oil product imports in February. It is expected to limit Russia’s ability to ship crude and products worldwide and, therefore, could tighten the market.
Meanwhile, output from the Organisation of the Petroleum Exporting Countries (OPEC) fell in October for the first time since June, in addition to pumping 1.36 million barrels per day below its targets.
Modupe Gbadeyanka