Crude oil prices moved lower today as the Federal Reserve signaled the U.S. economy is not yet out of the woods and the EIA reported yet another weekly build in crude oil stocks.
Although prices had inched up right after the Fed’s monetary policy meeting, which concluded with a decision for a 25-basis-point interest rate hike, they got pressured by comments made by chair Jerome Powell about credit risks in the banking system of the country.
The comments follow two rather spectacular banking collapses earlier this month that sent crude oil plunging on fears they could start off a domino effect in the U.S. banking industry.
"Economic risks were being flagged out in the Fed meeting, while higher-than-expected U.S. crude oil stockpiles also dampened some optimism around demand outlook," IG market strategist Yeap Jun Rong told Reuters.
Meanwhile, OPEC+ contributed to the bearish sentiment on oil markets by saying it had no plans to make new adjustments to its production schedule despite the drop in oil prices.
Speaking to Reuters earlier this week, some OPEC+ delegates said that the group was not going to intervene in the oil market with changes to its production policy, likely keeping the current quotas until the end of 2023.
“It would be premature for OPEC+ to take action without first understanding what the risks are,” Energy Aspects analysts said in a note, also this week.
According to JP Morgan’s head of global commodity research, Natasha Kaneva, the oil market will be oversupplied in the next two months with prices remaining under pressure until May as global stocks will likely grow by 46 million barrels.
The two things that can change this, according to Kaneva, are market intervention by OPEC+ through another output adjustment and a decision by the U.S. administration to start refilling the strategic petroleum reserve.
By Irina Slav for Oilprice.com
