Crude Oil News Today: Prices Fall as Fed Signals No Rate Cuts

Oil Prices Decline as Fed Officials Dismiss Rate Cut Prospects

Oil prices fell early on Friday as investors reacted to comments from U.S. Federal Reserve officials dismissing the possibility of imminent rate cuts and a surprising increase in U.S. gasoline stocks.

At 08:19 GMT, Light Crude Oil futures are trading $77.75, down $0.16 or -0.21%.

Fed Officials Cautious on Rate Cuts

Dallas Federal Reserve President Lorie Logan emphasized the importance of flexibility in monetary policy, indicating it is too soon to consider rate cuts despite recent easing in inflation. Logan stated that the central bank must keep “all options on the table” as it monitors economic data. This cautious stance suggests that the Fed remains vigilant about inflationary pressures, potentially leading to sustained higher interest rates, which can weigh on oil demand by slowing economic growth.

Unexpected Gasoline Inventory Build

The Energy Information Administration (EIA) reported a surprise build in U.S. gasoline inventories, which rose by 2 million barrels to 228.8 million barrels for the week ending May 24. This increase contrasts with the expected 400,000-barrel draw, indicating weaker-than-anticipated demand ahead of the Memorial Day weekend, traditionally the start of the summer driving season. The higher gasoline stocks suggest a potential dampening effect on crude oil prices as the market adjusts to the unexpected supply surplus.

Crude Oil Inventory Draw

Conversely, U.S. crude oil inventories fell by 4.2 million barrels to 454.7 million barrels, surpassing the anticipated 1.9 million-barrel draw. This significant reduction indicates robust demand for crude oil, providing some support to prices. However, the bearish sentiment from the gasoline inventory build overshadowed the positive impact of the crude draw.

OPEC+ Production Cuts Extension

OPEC+ is negotiating a complex agreement to extend its substantial oil production cuts into 2025. The coalition, led by Saudi Arabia and Russia, is currently reducing output by 5.86 million barrels per day, approximately 5.7% of global demand. This ongoing commitment to managing supply levels underscores OPEC+’s efforts to stabilize the market amidst fluctuating demand and geopolitical uncertainties.

Market Forecast

Given the mixed signals from inventory data and cautious Fed remarks, the short-term outlook for oil prices appears bearish. The unexpected gasoline inventory build highlights potential demand concerns, while the Fed’s stance on maintaining higher interest rates could further pressure oil prices by dampening economic activity. Traders should monitor upcoming OPEC+ decisions and U.S. economic indicators for further market direction.

Technical Analysis

Light crude oil futures are trading lower for a third straight session on Friday after crossing to the weakside of the 200-day moving average at $78.18. This indicator is new resistance.

The market is hovering near a long-term 50% level at $77.33. This could provide some support on the first test, but if it fails then look for the selling to possibly extend into the short-term bottom at $76.15.