Oil prices fall amid prolonged interest rate hikes

(MENAFN) Last week witnessed a downturn in oil prices, spurred by remarks from officials of the US Federal Reserve hinting at the potential persistence of elevated interest rates, posing potential challenges to demand from the world's leading consumers of crude oil. Lori Logan, President of the Federal Reserve Bank of Dallas, remarked on Friday about the ongoing uncertainty surrounding whether monetary policy adjustments have been sufficiently stringent to curb inflation and align it with the US central bank's target of two percent.

Traditionally, high interest rates serve to temper economic activity and dampen the appetite for oil. This sentiment reverberated across oil markets, with Brent crude marking a marginal loss of 0.2 percent over the week, while US West Texas Intermediate crude experienced a slight uptick of 0.2 percent.

During Friday's trading session, Brent crude futures contracts registered a decline of USD1.09, equivalent to 1.3 percent, settling at USD82.79 per barrel. Similarly, US West Texas Intermediate crude futures witnessed a drop of one dollar, or 1.3 percent, concluding at USD78.26 per barrel.

Atlanta Federal Reserve Bank President Raphael Bostic offered insights to Reuters, indicating a likelihood of inflation deceleration under the prevailing monetary policy framework. This projection could prompt the central bank to initiate interest rate cuts in 2024, although any such reduction might be modest, possibly amounting to a quarter of a percentage point. Bostic suggested that such adjustments are unlikely to materialize before the latter part of the year.

The convergence of these factors underscores the intricate interplay between monetary policy decisions and their ramifications on oil markets, highlighting the significance of central bank guidance in shaping investor sentiment and commodity pricing dynamics.

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