By Ambar Warrick
Investing.com -- Oil prices fell in Asian trade on Thursday tracking weak economic signals from the Federal Reserve, while media reports suggested that OPEC+ will likely keep output unchanged next month, despite a recent crash in prices.
A three-day recovery rally in crude ran out of fuel after the Fed hiked interest rates as expected, but downgraded its GDP outlook for the year.
Reuters also reported that the Organization of Petroleum Exporting Countries and allies (OPEC+) is likely to keep output unchanged during an April meeting, and will maintain a previously announced 2 million barrel per day cut.
Brent oil futures sank 1.2% to $75.82 a barrel, while West Texas Intermediate crude futures fell 1.3% to $69.98 a barrel by 22:06 ET (02:06 GMT). Both contracts were up more than 4% each from a 15-month low hit last week.
The Fed said it will likely raise interest rates further to curb high inflation, which analysts warned is set to further weigh on the U.S. economy. Fears of slowing economic growth have rattled oil markets this year, with the recent collapse of several U.S. and European banks exacerbating concerns over this trend.
The central bank expects the U.S. economy to grow 0.4% this year, down from previous expectations of 0.5%.
The report on OPEC+ production also disappointed some traders holding out for more supply cuts, given the steep losses in oil prices this year.
But on the other hand, U.S. oil demand showed some resilience as gasoline inventories fell far more than expected in the week to March 17. While overall U.S. inventories grew, a drop in oil product inventories showed that demand was improving amid better weather conditions.
The dollar also sank after the Fed’s comments, with traders betting that the Fed will only have enough economic headroom to raise rates once more. This benefited commodities priced in the greenback by making them cheaper for international buyers.
Consultancy firm Wood Mackenzie said on Thursday that China will drive at least 40% of an increase in global crude demand this year, as the country reemerges from COVID lockdowns.
But a Chinese recovery will provide a limited boost to prices, Mackenzie warned, stating that crude markets had largely adapted to ructions from the Russia-Ukraine war.