Oil prices erase gains as U.S. Fed raises rates

Oil prices were trending down slightly on Wednesday following the 2:30p.m. EST Federal Reserve’s announcement of another hike in interest rates by three-quarters of a percentage point for the second time in a row, while Wall Street continued to flounder in predictions as to what comes after this, while oil prices continue to climb.

At 2:38 p.m. ET, WTI was trading up 2.19% on the day at $97.06 per barrel, with Brent crude trading up 2.03% on the day at $106.50.

On June 15th, the Fed made its largest rate hike since 1994, raising rates by 75 basis points (three-quarters of a percentage point), with oil prices responding downwards slightly in the immediate aftermath. Like today’s Fed announcement, Wall Street had already priced in June’s rate hike.

The first half of July saw oil prices fall despite tight physical crude markets on fears that the global economy is heading for a recession. Fed rates hikes and the growing potential for oil demand destruction due to inflation pushed oil lower earlier last month.

Oil prices have fallen over the last month from above $111 per barrel as recession fears have worried markets. But the tight physical market has put a floor under those losses. Crude prices were trading up on Wednesday leading up to the Fed announcement on bullish EIA data that suggested U.S. crude oil demand was on the rise–spurred on by robust exports–amid the tight global market.

The EIA’s inventory data published earlier in the day showed that crude oil stockpiles in the United States shrunk by 4.5 million barrels in the week ending July 22, in addition to the 5.6 million barrels that were released from the nation’s Strategic Petroleum Reserves. Gasoline inventories dipped also, following seasonal trends during peak driving season in the United States.