Gasoline prices today (June 15): Decreased after the Fed signaled an interest rate hike

The Fed will continue to raise interest rates, the US oil reserves increase dramatically, pushing oil prices down. Brent crude oil price fell to 73.2 USD/barrel.

World oil prices

Reuters reported that at the end of the trading session on June 14, oil prices fell 1.5% after the US Federal Reserve (Fed) expected to raise interest rates more this year, causing the market to worry about demand, especially in the context of a surprisingly strong increase in US crude oil reserves.

Oil prices fall after Fed signals interest rate hike. Illustration: Businesstoday

Brent crude futures fell $1.09, or 1.5%, to $73.20 a barrel, while U.S. West Texas Intermediate (WTI) crude closed down $1.15, or 1.7%, to $68.27 a barrel.

Both oil benchmarks rose more than 1.5% earlier in the session and gained more than 3% in the previous session on expectations of increased fuel demand after China's central bank cut its short-term lending rate.

As expected by analysts, the Fed decided to keep interest rates unchanged at its June 14 meeting. However, the agency signaled in new economic projections that borrowing costs could rise another half a percentage point later this year as the economy and inflation cool more slowly than expected.

The Fed's decision ended a streak of 10 consecutive rate hikes and the US policy interest rate is being kept in the range of 5 - 5.25%.

“The market is worried that a higher interest rate environment will reduce oil demand. The knee-jerk reaction is pushing oil prices lower,” said Phil Flynn, an analyst at Price Group.

Expectations of further interest rate hikes have supported the dollar, which has led to a fall in oil prices. Wall Street stocks fell after the Fed’s decision and comments, while gold prices also slowed.

In addition to interest rates, the shocking increase in US oil reserves has also pushed oil prices down. Data from the US Energy Information Administration (EIA) on June 14 showed that US crude oil reserves increased by about 8 million barrels in the week ending June 9, a "huge" increase compared to analysts' forecast of a decrease of 500,000 barrels. Along with crude oil, gasoline and diesel reserves also increased more than expected last week.

Will oil prices continue to fall below $70/barrel? Illustration photo: Reuters

Meanwhile, the International Energy Agency (IEA) has increased its forecast for oil demand growth this year by 200,000 barrels per day to 2.4 million barrels per day, bringing total expected demand to 102.3 million barrels per day.

However, the agency expects economic headwinds to reduce demand by 860,000 barrels per day next year, and increased electric vehicle use to reduce demand by 400,000 barrels per day by 2028 to 105.7 million barrels per day.

The IEA's 2023 oil demand growth figure is slightly higher than OPEC's forecast.

JPMorgan has lowered its forecast for average Brent crude oil prices this year to $81 a barrel.