Oil rallies after central banks pause rate hikes

Oil prices rallied on Thursday, with WTI price rising above the $83.0 per barrel level. If WTI price declines, it may encounter support near $77.6 per barrel, while resistance may be found near $87.2 per barrel.

Oil prices are kept in check by a strong US dollar and high-interest rates. Most major central banks, however, are hitting pause on rate hikes, boosting oil prices. The BOE voted to keep interest rates unchanged on Thursday.  On Wednesday, FOMC members voted to keep interest rates unchanged at a target range of 5.25% to 5.50%. 

Fed Chair Jerome Powell’s speech after the conclusion of the meeting had hawkish undertones. The Fed’s approach remains largely data-driven and will depend on how fast inflationary pressures may ease in the next months. Even if the Fed has reached its interest rate ceiling though, rates are likely to stay high for longer, driving oil demand outlook and oil prices down. 

The Energy Information Administration announced on Wednesday that US crude oil inventories continued to rise. Oil inventories rose by 0.8M barrels in the week ending on October 29th, putting pressure on oil prices. 

Oil prices have been supported by geopolitical risks in the past few weeks. The crisis between Israel and Hamas continues, propping up oil prices. Especially fears of a potential Iranian involvement are buoying oil prices. This week, however, fears that the war would disrupt oil supply eased, and oil prices slipped. Even as Israel’s military invades Gaza, the crisis seems to be contained so far and risks of the war spreading in the region abate. 

OPEC+ kept its output policy unchanged at its latest meeting, maintaining its recent cuts by Russia and Saudi Arabia, which have already been extended till the end of the year. 

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Written by:
Myrsini Giannouli

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