Crude oil falls after US fed rate hike, inventory gains

Higher US rates support the dollar, making oil and other commodities more expensive

Crude futures fell in Asian trade on Thursday, adding to sharp losses the previous session after the Federal Reserve raised rates for the first time in nearly a decade.

Crude futures fell in Asian trade on Thursday, adding to sharp losses the previous session after the Federal Reserve raised rates for the first time in nearly a decade.

 

Crude futures fell in Asian trade on Thursday, adding to sharp losses the previous session after the Federal Reserve raised rates for the first time in nearly a decade and official figures showed a surprise build in US inventories.

West Texas Intermediate for January delivery, the front-month contract, was down 5 cents to $35.47 a barrel by 07.42 GMT after finishing down nearly 5 per cent on Wednesday.

Brent crude for February delivery, the front-month contract from Thursday, fell 12 cents to $37.27. The global benchmark fell 3.3 per cent the previous session.

“Last night’s inventory data from the US was clearly unsettling,” said Ric Spooner, chief market analyst at CMC Markets in Sydney, adding the Fed’s rate hike was also behind the falls.

The US Fed hiked interest rates for the first time in nearly a decade on Wednesday, a sign it believes that the US economy had largely overcome the calamity that was the 2007-2009 financial crisis.

Higher US rates typically support the dollar, making oil and other commodities denominated in the greenback more expensive, undermining demand.

The dollar added almost 1 percent to 98.778 against a basket of major currencies and looked set for another test of stiff resistance around the 100.00 mark.

US crude stocks increased last week as imports into the Gulf Coast rose, data from the Energy Information Administration (EIA) showed on Wednesday, surprising analysts who expected inventories to decline.

The EIA data showed crude inventories rose 4.8 million barrels last week to near record highs, while analysts in a Reuters poll had forecast a drop of 1.4 million barrels.

Adding to the overall bearish global picture, OPEC producers see scant chance of a significant rise oil prices in 2016 as extra Iranian production could add to the ongoing glut and the prospect of voluntary output restraint remains remote.

Another potential source of supply for international markets, if not immediately, would be US crude should lawmakers vote to lift a ban on exports as early as Friday.

Ending the four-decade ban on most exports of crude oil, would end a years-long fight prompted by the boom in shale output that has already contributed to the supply glut.

“It may take a little while to get going,” Spooner said. “The main impact is likely on the relativities between WTI and Brent and we have seen some further narrowing as a consequence of that.”

A year ago WTI crude was about $5 a barrel cheaper than Brent, but that gap had shrunk to less than $2 by the close on Wednesday.

Reuters