Oil prices climbed as the US Federal Reserve maintained the status quo on funds rates, while the dollar index strengthened against a basket of currency.
Crude Oil

Oil Prices Climb after US Fed Keeps Rates

Oil prices climbed as the US Federal Reserve maintained the status quo on funds rates, while the dollar index strengthened against a basket of currency.

The Fed’s decision to keep interest rate hikes on pause for a second consecutive time has bolstered economic sentiment and supported commodity prices.

ICE Brent has been trading firm this morning on positive economic sentiment after the US Fed continued to pause interest rate hikes. The hawkish tone remains in the accompanying statement. Lower crude oil inventory in the US and Europe also continued to be supportive of crude oil prices.

ICE Brent crude surged to $85.70 per barrel, up by a 1.26% rise from the closing price of $84.63 a barrel in the previous trading session on Wednesday.

The American benchmark West Texas Intermediate (WTI) traded at the same time at $81.71 per barrel, up 1.58% from Wednesday’s close of $80.44 per barrel.

The Fed avoided an interest rate hike, as largely expected, to maintain its federal funds rate constant at between 5.25% and 5.5%, the highest level in 22 years, in support of higher oil prices.

Also, the prolonged tension between Israel and Palestine is causing investor concerns about secure supplies, as confrontations could escalate into regional turmoil, disrupting oil supply routes.

These risks were exacerbated when Egyptian authorities informed the border authority in Gaza that the Rafah crossing would open on Wednesday to facilitate the passage of critically injured Palestinians for treatment in Egypt.

The first British nationals passed through the Rafah border crossing from Gaza into Egypt, following the UK Foreign Office’s announcement on Wednesday of its offer of ground assistance.

‘We will continue working with partners to ensure the crossing is opened again, allowing vital aid into Gaza and more British nationals to leave safely,’ it added in the statement.

US commercial crude oil inventories increased by 0.2% during the week ending Oct. 27, according to data released by the Energy Information Administration (EIA) on Wednesday.

Inventories rose by around 800,000 barrels to 421.9 million barrels, compared to the American Petroleum Institute’s expectation of a rise of around 1.3 million barrels.

Strategic petroleum reserves, which are excluded from commercial crude stocks, remained unchanged at 351.3 million barrels last week, the data revealed.

Gasoline inventories increased by about 100,000 barrels to 223.5 million barrels over the same period.

Crude production

EIA data showed that US crude oil production increased by 3,000 barrels per day (bpd) to around 13.63 million bpd during the week ending Oct. 27.

US crude oil imports also rose by 412,000 bpd to about 6.42 million bpd over the same period, while crude oil exports increased by 64,000 bpd to approximately 4.89 million bpd.

In the Short-Term Energy Outlook (STEO) released on Oct. 11, the EIA predicted that crude oil output in the country would reach an average of 12.92 million bpd this year. Next year, crude oil output in the country is expected to reach 13.12 million bpd.

Preliminary OPEC production numbers for October suggest a broadly stable output as the modest increases across most of its African members offset the declines elsewhere.

According to a Bloomberg survey, OPEC output increased by 50Mbbls/d month on month to 28.1MMbbls/d last month.

Nigeria led the gains, with their production rising by 60Mbbls/d to 1.5MMbbls/d followed by Venezuela (+30Mbbls/d), Congo (+20Mbbls/d) and Gabon (+20Mbbls/d). The output additions were partially offset by declining production in Iraq (-40Mbbls/d), Iran (-30Mbbls/d), Kuwait (-20Mbbls/d) and Libya (-20Mbbls/d).

As for refined products, gasoline stocks rose by 0.1MMbbls, while distillate stocks fell by 0.8MMbbls. US refinery utilization softened further to around 85.4% as refineries aim to complete maintenance activity before winter demand kicks in.

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