Oil prices rebound on Thursday after a three-day slump that pushed them to their lowest point since mid-March. This rise comes despite the U.S. Federal Reserve’s decision to hold interest rates steady and warnings about inflation, which could dampen economic growth and oil demand.
Key Points (Oil prices rebound) :
- Prices Up: Brent crude rose 0.95% to $84.23, while West Texas Intermediate (WTI) gained 0.87% to $79.69 per barrel.
- Previous Slump: Prices had plunged over 3% on Wednesday due to the Fed’s stance and a surprise surge in U.S. crude inventories, reaching a seven-week low.
- Inventory Surprise: The Energy Information Administration (EIA) reported a 7.3 million barrel increase in crude inventories, exceeding analyst expectations by a significant margin. This build pushed stockpiles to their highest level since June.
- Price Rebound Factors:
- Ceasefire Talks: Renewed hope for a ceasefire between Israel and Hamas in the ongoing conflict provided some support to prices.
- Strategic Reserve Buying: The potential for the U.S. government to purchase oil for its Strategic Petroleum Reserve (SPR) at lower prices also buoyed the market. The U.S. aims to replenish the SPR after significant sales in 2022, and reports suggest they might be interested in buying at $79 per barrel or lower.
Lingering Concerns:
- Geopolitical Tensions: While ceasefire talks offer some optimism, the overall situation in the Middle East remains volatile, and any escalation could disrupt oil supplies and push prices back up.
- Inflation and Economic Growth: The Fed’s warnings about inflation and its potential impact on economic growth raise concerns about future oil demand, which could limit price gains.
Overall, the oil market appears to be nearing a balance. The recent price drop seems to have factored in the Fed’s stance and the inventory build. However, the geopolitical situation and the U.S. government’s potential buying spree for the SPR will be crucial factors to watch in the coming days.