Market reacts to the positive news
Oil prices in the Asian market witnessed an increase in early trading on Thursday. This surge comes after a larger-than-anticipated weekly withdrawal from U.S. crude storage and an announcement from the U.S. Federal Reserve regarding future interest rate adjustments. The news of lower borrowing costs in 2024, as indicated by the Federal Reserve, has a positive impact on the oil market.
Impact of lower interest rates
Lower interest rates have a direct impact on consumer borrowing costs, thereby driving economic growth and increasing demand for oil. Additionally, the decrease in interest rates has caused the dollar to depreciate, resulting in oil becoming more affordable for foreign buyers.
Positive movement in oil prices
Brent futures experienced a 0.6% increase, equating to a settlement price of $74.72 per barrel by 0007 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude witnessed a rise of 0.7%, settling at $69.95. These increases are a continuation of the positive market trend from the previous session, which was initially influenced by concerns over the security of Middle East oil supplies following an attack on a tanker in the Red Sea. The Red Sea incident involved a speedboat carrying gunmen who targeted the vessel with missiles. The shipping lane had already been under threat after Yemeni Houthi forces cautioned against travel to Israel.
Stockpiles decline due to decreased imports
In addition to the news of lowering borrowing costs, the U.S. Energy Information Administration (EIA) reported that energy firms withdrew a larger-than-expected 4.3 million barrels of crude from stockpiles during the week ending December 8. This withdrawal was driven by a decrease in imports, resulting in a reduction in overall stock levels.