Oil prices come under pressure following Fed’s latest remarks

The front-month ICE Brent futures lost $0.98/bbl to settle at $81.90/bbl on Wednesday, after the US Federal Reserve (Fed) released minutes of the latest FOMC meeting.

PHOTO: The US Federal Reserve's headquarters in Washington DC. Getty Images

Brent’s price trailed lower yesterday after minutes from the latest Federal Open Market Committee (FOMC) meeting showed that the US central bank could further tighten interest rates if inflationary pressures remain elevated.

The Fed’s bearish remarks have weighed on the oil market’s expectation of a steady demand growth this year as it could maintain interest rates at current levels for longer than expected.

The US central bank kept interest rates unchanged at 5.25-5.5% during its two-day policy meeting held on 30 April – 1 May. It will be open to discussions about possible further hikes to bring down the stubborn inflation, according to the minutes.

"Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate," minutes of the Fed's meeting stated.

Higher interest rates increase borrowing costs for dollar-denominated commodities like oil and often dampen demand growth.

“Crude futures were extending Wednesday’s moderate losses early Thursday, under pressure from markets recalibrating for a higher-for longer US interest rate regime,” VANDA Insights’ founder and analyst Vandana Hari said.

By Aparupa Mazumder 

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