Oil’s torrid rally is taking a breather as a smaller-than-expected drop in US crude inventories bolstered technical resistance to further gains.
The most active West Texas Intermediate futures fell below $90 a barrel after the Federal Reserve left its benchmark interest rate unchanged while signaling that borrowing costs are likely to remain higher for longer time after another hike this year. Traders fled risk assets, and stocks also fell.
“Crude oil prices are lower after the Fed offered a bold jump and upbeat forecasts,” said Ed Moya, senior market analyst at Oanda. “A small fall in inventory and risks that Fed policy will be tighter for much longer than initially expected allow energy traders to lock in some profits.”
The fall comes after crude oil has rallied over the past three weeks on supply constraints from OPEC+ hubs Saudi Arabia and Russia, as well as brighter outlooks in the two largest economies, the US and the china Crude oil has been intermittently overbought on a technical basis for several days, suggesting that the rally to a 10-month high may have been overdone.
Still, widely followed supply and demand measures reinforce signs that the market is tightening. US inventories fell 2.14 million barrels last week. Meanwhile, inventories in Cushing, Oklahoma fell to 23 million barrels, just about 2 million barrels away from minimum operating levels.
Also, timespreads retain a strong tone. The gap between the two closest December WTI contracts was just under $10 a barrel in a lagging bullish structure, more than double the one-month figure.
Prices:
- WTI for November delivery was down 82 cents at $89.66 a barrel in New York.
- The October contract, which expires on Wednesday, settled at $90.28 a barrel.
- Brent for November settlement fell 81 cents to settle at $93.53 a barrel.
