Oil Prices Climb as US Dollar Weakens
Prices of crude oil increased as the US dollar weakened after the Fed’s decision to keep rates. Brent crude is up 0.6% at $87.34 a barrel while West Texas Intermediate is 0.7% higher at $83.07 a barrel.
The Fed’s decision to hold the federal funds rate steady between the 5.25% and 5.5% target range prevented a widely anticipated interest rate hike, causing the dollar to weaken in support of higher oil prices.
Despite the fact that the Fed has avoided raising interest rates for the third time, the federal funds rate remains at its highest level in 22 years.
Meanwhile, supply concerns caused by the conflict between Israel and Palestine continue to impact oil prices.
The Israeli army implied on Thursday that there will not be a cease-fire for the time being, which raised investor concerns about secure supplies and put upward pressure on oil prices.
‘The army has completed the siege of Gaza City, which is considered the epicenter of Hamas,’ Israeli army spokesperson Daniel Hagari said in a news conference aired by the Israeli Broadcasting Authority.
‘A cease-fire is not on the table at this time,’ Hagari stressed. However, the Energy Information Administration (EIA) reported on Wednesday that US commercial crude oil stocks rose by 0.2% during the week ending October 27, which limited upward price pressures.
The data indicated that US 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.
Oil prices moved higher, with markets worried about supply from the Middle East amid the Israel-Hamas war. Trading has been volatile, with BMI Brent prices having closed above $90 a barrel and below $85 a barrel this week.
Prices surged as risk appetite broadly picked up across markets following the US Federal Reserve’s statement hinting it might be done raising interest rates, ANZ Bank said in a Friday note.
The risk-on tone found support from a weaker US dollar, making commodities more attractive to most consumers, the bank noted.
Geopolitical developments were also supportive as the US reportedly has intelligence showing that Russia’s Wagner Group may send air defence weapons to Iran-backed Hezbollah, according to The Wall Street Journal.
This could raise the risk of the conflict spreading across the region and affecting oil supplies, ANZ Bank said. So far, however, the Israel-Hamas war has had a limited impact broadly and on oil markets, the bank said. Naira Devaluation Deepens Economic Crisis in Nigeria
