Oil prices fall amid Federal Reserve inflation concerns, excess inventories

(MENAFN) In early Thursday trading, oil prices experienced their fourth consecutive session of losses, influenced by revelations from the Federal Reserve's meeting minutes regarding potential monetary tightening measures in response to persistent inflationary pressures. The prospect of further tightening by the US central bank has raised concerns about the potential dampening effect on oil demand, contributing to the downward pressure on prices.

Brent crude futures dipped by 46 cents, representing a 0.6 percent decline, to USD81.44 per barrel, while West Texas Intermediate crude futures saw a decrease of 54 cents, or 0.7 percent, falling to USD77.03 per barrel by 0424 GMT. The decline follows a similar trend from the previous trading day, where both benchmarks registered losses exceeding 1 percent.

The minutes released from the Federal Reserve's recent monetary policy meeting highlighted discussions regarding the possibility of further monetary tightening measures should inflationary risks persist. While the central bank currently intends to maintain its current interest rate policy, participants expressed willingness to consider additional increases if deemed appropriate in response to evolving economic conditions.

The correlation between interest rates and oil demand was underscored, as lower interest rates typically translate to reduced borrowing costs, potentially stimulating economic growth and consequently boosting demand for crude oil. However, the prospect of a shift towards tighter monetary policy has prompted concerns about the potential impact on economic activity and oil consumption.

Market sentiment was further influenced by data from the Energy Information Administration indicating a surprise increase in US crude inventories by 1.8 million barrels over the previous week, contrasting with expectations of a 2.5 million barrel decrease. This surplus in inventory adds to existing market pressures, reflecting weak demand from refineries alongside ample oil supply globally.

Overall, the combination of inflationary concerns, potential monetary policy adjustments, and surplus oil inventories has contributed to a challenging environment for oil markets, with downward pressure on prices expected to persist amidst uncertainty regarding future economic conditions and demand dynamics.  



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