Crude Oil Price Prints Red As Fed-Fueled Demand Fears Carry the Day

Summary:
• The commodity has encountered fresh headwinds as hawkish comments by two FOMC members on Thursday erased inventory data gains.

Oil prices have fallen on Friday as the market reacts to the latest comments by two Federal Reserve governors.  CFDs on benchmark WTI crude oil were down by 1.04% and trading at $77.47 at the time of writing. Similarly, Brent Crude was down -0.92% and going for $82.63 per barrel.

While the higher-for-longer interest rate sentiment has been around for some time, Thursday’s comments by Fed Governors Lisa Cook and Christopher Waller provided fodder for this. The two stated that they were not only concerned about bringing inflation to the 2% level, but ensuring that the economy could sustain it.  Consequently, the market is currently bracing for at least 2 months’ wait for rate cuts.

High interest rates of between 5.25%-5.50% have largely kept inflation in check. However, concerns abound that keeping high interest rates for longer could weigh down on the economy. Ultimately, this could lead to reduced demand for oil, thus pulling down prices. Furthermore, it does not help that the IEA has already forecast a slowdown in the demand for the world’s most traded commodity.

Crude oil prices had received a shot in the arm earlier on Thursday, when the Energy Information Agency’s US crude oil inventories data showed a decline in the stockpiles. The EIA reported that the inventories had declined to 3.514 million barrels, from 12 million barrels the previous week. Furthermore, that was lower than the 3.879 million barrels projected by analysts. Notably, this came after the American Petroleum Institute had released figures showing a build-up in the stockpiles.

Oil prices lack support from the geopolitical scene. Israel seems to have kept on hold its ground invasion of Rafah, and the market has largely ignored Houthi rebels’ attacks on Red Sea cargo ships. Therefore, we are likely to witness further declines by oil heading into the weekend.

Technical analysis

WTI crude price looks to pivot at 78.00, and the RSI signals control by the sellers. This momentum will likely see the commodity target 76.85, with extended bear support possibly powering downside action to test 76.30. The price could, however, head higher if it breaches 78.00. At that point, the bulls will target 78.40, above which 78.90 could be within reach.

Crude oil on a 30-minute price chart