Crude oil prices plunged Thursday for the first time in six days, after the U.S. Federal Reserve cooled hopes for a string of interest rate cuts, while rising U.S. output helped keep the market well oiled, Kallanish Energy reports.
The Federal Reserve reduced rates Wednesday, but against expectations the head of the U.S. central bank, Jerome Powell, said the move might not be the start of a lengthy series of cuts to shore up the economy against global economic weakness.
International benchmark Brent crude fell $1.49, or 2.3%, to $63.56 a barrel. U.S. West Texas Intermediate crude dropped $1.77, or 3%, at $56.81/Bbl.
A rising dollar makes oil more expensive for holders of other currencies and tends to weigh on commodities priced in the U.S. currency. The dollar hit a two-year peak against the euro Thursday after the Fed decision.
Oil’s drop came despite a bigger-than-expected decline in U.S. inventories and a fall in Opec production in July, typically bullish drivers for prices. But U.S. output rose in a market analysts say is well supplied.
Opec+, which includes most Opec members along with a number of non-Opec producers led by Russia has been curbing output this year to support the market.
In July, Opec production drew close to a 2011 low, helped by a further cut by Saudi Arabia, a Reuters survey showed.
But rising supplies from non-aligned producers, including the U.S., have offset Opec+’s efforts. U.S. output rebounded to 12.2 million barrels per day (Mmbpd) during the week ended July 26, from 11.3 Mmbpd a week earlier, Energy Information Administration data showed on Wednesday.
Adding further downward pressure on prices was a lack of progress by the U.S. and China in resolving their year-long trade dispute. Negotiators ended talks on Wednesday and agreed to meet again in September.
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