Adedapo Adesanya
By Adedapo Adesanya
Crude oil fell on Wednesday as the US Federal Reserve held interest rates steady and demand concerns continued to weigh.
This weakened the Brent crude futures by $1.43 or 1.64 per cent to $85.95 per barrel and brought down the US West Texas Intermediate (WTI) crude futures by $1.79 or 2.14 per cent to $81.68 per barrel.
The US Federal Reserve held rates at a 23-year high in the 5.25 per cent to 5.50 per cent range and maintained expectations for three cuts before the end of 2024.
The US central bank plans to cut three times before the end of the year, reaffirming its previous forecast from December. That said, the central bank indicated that it needs greater evidence that inflation is easing before it starts taking its foot off the brakes.
Along with the decision, Fed officials pencilled in three quarter-percentage point cuts by the end of 2024, which would be the first reductions since the early days of the COVID-19 pandemic in March 2020.
This overshadowed support that came when the US Energy Information Administration (EIA) said crude oil stockpiles fell unexpectedly last week as exports rose and refiners continued to increase activity.
US crude oil inventories had shed 2 million barrels in the week to March 15, with petroleum (called gasoline) stocks also declining.
The crude oil inventory change compared with a draw of 1.5 million barrels for the previous week, which also featured a substantial inventory decline in gasoline inventories. Gasoline inventories fell by 3.3 million barrels in the week to March 15, with production averaging 9.6 barrels daily. This is compared with a draw of 5.7 million barrels and production of 9.9 million barrels daily a week earlier.
Growing concern about global fuel supply amid drone attack disruptions in Russian refining activity provided support.
Ukrainian strikes have so far taken nearly between 370,000 and 900,000 barrels per day worth of Russia’s refining capacity offline, depending on which analyst estimates are used.
Ukraine has carried out a string of refinery attacks using drones in the past few weeks, inflicting significant damage to more than 10 oil and gas processing facilities throughout Russia.
With Russia’s refining capacity for the second quarter now reduced by missile strikes and seasonal planned and unplanned refinery maintenance expected to take place this quarter, the world’s largest fuel exporter could find its revenues curtailed.
A decline in oil exports from Saudi Arabia and Iraq, the two leading producers in the Organisation of the Petroleum Exporting Countries (OPEC), also contributed to the upward trend.
