Crude Oil News Today: Fed Concerns Weigh Despite Robust US Fuel Demand

James Hyerczyk
Published: May 24, 2024, 10:27 GMT+00:00

Key Points:

  • Oil prices are lower as traders assess the Fed's stance on interest rates and inflation.
  • Prices still lower despite the highest U.S. gasoline demand since November.
  • OPEC+ to decide on extending 2.2 million bpd output cuts, crucial for market stability.
Crude Oil News Today

In this article:

Oil Prices Steady Amid Fed Comments and U.S. Fuel Demand

Oil prices are lower on Friday as traders weighed recent comments from the U.S. Federal Reserve on interest rates amidst persistent inflation. Support also came from strengthening U.S. seasonal fuel demand.

At 10:17 GMT, Light Crude Oil futures are trading $76.28, down $0.59 or -0.77%.

Benchmark Price Performance

Brent crude futures settled at their lowest level since February, while U.S. crude futures hit a three-month low on Thursday. Brent futures are heading for a weekly decline of over 3%, and WTI futures are poised for nearly a 4% drop from last week. The anticipation of ‘higher-for-longer rates’ has put significant pressure on oil prices this week.

Federal Reserve’s Influence

Minutes from the Fed’s latest policy meeting, released on Wednesday, showed policymakers debating whether current interest rates are sufficient to control inflation. Some officials expressed willingness to increase borrowing costs if inflation rises further. However, Fed Chair Jerome Powell and others have indicated that further rate hikes are unlikely. Higher rates could slow economic growth and reduce fuel demand.

U.S. Fuel Demand

Strengthening U.S. gasoline demand ahead of the Memorial Day holiday weekend has helped stabilize prices. The Energy Information Administration (EIA) reported that gasoline demand reached its highest level since November. This seasonal uptick is significant as U.S. drivers represent about a tenth of global oil demand, making the summer driving season a crucial factor for global demand recovery, according to ANZ analysts.

OPEC+ Meeting

Attention is now on OPEC+ and their upcoming meeting to decide on extending voluntary oil output cuts of 2.2 million barrels per day (bpd). The meeting, initially scheduled for June 1 in Vienna, has been moved online to June 2. OPEC+ has implemented cuts totaling 5.86 million bpd since late 2022, equivalent to about 5.7% of daily global demand. Sources suggest an extension of these cuts is likely, despite rising output from the U.S. and other non-member producers.

Market Forecast

Considering the economic backdrop and supply decisions, the market outlook is bearish. While the firm U.S. gasoline demand offers some support, the persistent concerns over interest rates and potential further Fed actions are likely to weigh on prices. Traders should prepare for further declines in the short term, influenced by macroeconomic constraints and OPEC+ decisions.

Technical Analysis

Daily Light Crude Oil Futures

Light crude oil futures have returned to a long-term downtrend after crossing to the bearish side of the 200-day moving average earlier in the week. Currently at $78.17, this indicator is new resistance.

Selling pressure also took out last week’s short-term swing bottom at $76.21. This could trigger a round of sell-stops and lower prices with $75.00 a potential target.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?