Harvest Global Markets :

Wednesday morning sees a sharp decline in crude oil prices, which hit a six-month low during the previous session. A spike in U.S. consumer prices that was not anticipated is said to have compounded worries about oversupply and declining demand.

It is now more widely believed that the Federal Reserve may not lower interest rates anytime soon as a result of the unexpected increase in the November consumer price index (CPI). Due to the potential for extended higher interest rates to impede economic growth and reduce demand for oil, this unexpected inflationary pressure has an impact on the oil market. Moreover, increased interest rates typically strengthen the dollar, which drives up the cost of dollar-denominated goods like crude oil for foreign consumers and consequently lowers demand.

OPEC and the International Energy Agency (IEA) have different predictions regarding the potential slowdown in the growth of the world’s oil demand in 2024. Market sentiment is further exacerbated by skepticism regarding the efficacy of the OPEC+ deal to reduce supplies by 2.2 million barrels per day in the first quarter.

The United States Energy Information Administration (EIA) has updated its forecast for crude oil production in the United States and decreased the price of Brent crude in 2024. A mixed short-term market outlook is presented by a report released by the American Petroleum Institute (API) on Tuesday, which indicates a decline in U.S. crude stocks.

The outcome of the Federal Reserve’s policy meeting and the weekly Energy Information Administration (EIA) report will determine the direction of the oil market on Wednesday. Further drops in oil prices could result from the Federal Reserve adopting a more aggressive stance. Furthermore, the data on U.S. oil stockpiles released on Wednesday may offer more understanding of market balances.

A pessimistic outlook for the market is influenced by a number of international economic and geopolitical factors, such as the recent agreement by OPEC+ members to reduce output and the rise in Russian crude exports. This points to a possible short-term continuation of the oil price decline.