Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Oil prices jump as rate hike doubts dent dollar

Published 11/01/2023, 09:09 PM
Updated 11/02/2023, 02:51 PM
© Reuters.

Investing.com -- Oil prices settled higher Thursday, rebounding from a one-month low spurred by lower dollar after traders priced in a diminished chance of more interest rate hikes from the Federal Reserve following a pause on hikes a day earlier.

By 18:30 ET (18:30 GMT), the U.S. crude futures settled 2.5% higher at $82.46 a barrel, while the Brent contract climbed 2.6% to $86.85 a barrel. Both benchmarks settled at their multi-weeks lows in the previous session, having dropped around 10% in October.

Crude benefits from more dovish Fed view

“The Fed’s decision to keep interest rate hikes on pause for a second consecutive time has bolstered economic sentiment and supported commodity prices,” said analysts at ING, in a note.

Fed Chair Jerome Powell said in a post-meeting briefing that the Fed still had a long way to go before inflation reached its 2% target. But he also noted that financial conditions had tightened substantially this year, and cited more risks to the economy.

The comments drew a sharp contraction in Treasury yields, pushing the dollar to hefty loss as traders priced in a smaller chance of another interest rate hike in December. 

A weaker dollar benefits commodities, including oil, which are priced in the greenback, as it makes the commodity cheaper for international buyers.

The crude market had suffered a difficult October, partially on fears stronger than expected economic data will lead the Fed to keep interest rates higher for longer, potentially weighing on global economic growth and curbing oil demand in China, the world’s largest consumer.

Small U.S. crude inventory build

The importance of the Fed meeting meant that markets largely traded past the weekly U.S. inventory data, with official numbers from the Energy Information Administration, released Wednesday, showing a slightly smaller-than-expected build in oil inventories over the week to October 27.

Distillate inventories saw a smaller-than-expected decline, while gasoline inventories saw an unexpected, albeit limited build. 

“Total crude oil inventory (excluding SPR) at around 421.9MMbbls remains about 5% below the five-year average at this point in the season,” said ING.

Investors will also be watching for developments in the Middle East, which has kept oil markets on edge as a wider conflict could disrupt oil supplies around the region.

European demand issues mount

However, demand could face a hit in Europe, a major energy consuming region, after data showed manufacturing activity contracted further in the eurozone in October, with the Purchasing Managers' Index falling by 0.3 points on the month to 43.1 - below the 50 level that signals contraction.

Additionally, the Bank of England held interest rates steady at a 15-year peak, and said it didn't expect to cut them any time soon as it fights to "squeeze out of the system" the highest inflation of the world's major economies.

(Ambar Warrick and Peter Nurse contributed to this item.)

Latest comments

Where's the "late trade" selloff?  Or do savvy "investors" only "buy" in the final hour?  Pathetic, fraudulent, criminally manipulated JOKE.
Yes, it is a joke. Hold rates means not dent dollar but its exactly bring more strong dollars and not supporting commodities prices.
Biggest investment JOKE in the world.
another simple minded canned response from mitch.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.