Oil softens on Fed rate decision, ample supply outlook

FE Team | Published: June 13, 2024 22:33:50

LONDON, June 13 (Reuters): Oil prices slipped on Thursday as investors digested that the US Federal Reserve had likely pushed back an interest rate cut to December and as US crude and fuel stocks rose.
Brent crude futures fell 60 cents, or 0.7 per cent, to $82 a barrel by 1207 GMT. West Texas Intermediate (WTI) US crude futures fell 68 cents, or 0.9 per cent, to $77.82. Both benchmarks had gained nearly 1.0 per cent in the previous session. The Fed held rates steady on Wednesday and pushed out the start of policy easing to perhaps as late as December.
"In the Fed's view this is the price that needs to be paid to achieve a soft landing and avoid recession beyond doubt," PVM Oil analyst Tamas Varga said.
Higher borrowing costs tend to dampen economic growth, and can by extension, limit oil demand.
Fed Chair Jerome Powell said in a press conference after the US central bank's two-day policy meeting that inflation had fallen without a major blow to the economy, adding that there was no reason to think that cannot go on.
On the supply side, US crude stockpiles rose more than expected last week, driven largely by a jump in imports, while fuel inventories also increased more than anticipated, data from the Energy Information Administration showed on Wednesday.
Also weighing on prices was a bearish report by the International Energy Agency, which warned of excess supply in the near future.
Traders are also watching ongoing talks for a ceasefire in Gaza, which, if resolved, would reduce fears of potential oil supply disruptions from the region.
In the latest attack on shipping, Iran-allied Houthi militants on Wednesday took responsibility for an attack by small craft and missiles that left a Greek-owned coal carrier in need of rescue near Yemen's Red Sea port of Hodeidah.
The militant group has attacked international shipping in the Red Sea region since November in solidarity with the Palestinians in the war between Israel and Hamas.
US Secretary of State Antony Blinken said Hamas had proposed numerous changes to a US-backed proposal for a ceasefire, adding that mediators were determined to close gaps in the negotiations.