google-play

Scan to Download iOS&Android APP


Oil prices fall after Fed rate hike: Could OPEC step in?

01:09, 23 September 2022

Share this article

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
 Traders work on the floor of the Chicago Board Options Exchange as the Federal Reserve makes an interest rate announcement
Oil prices struggle to hold onto gains after central banks hike rates prompting crude to slide as traders consider demand impact – Photo: Getty

Oil prices fell on Wednesday and have since clung onto slight gains after the US Federal Reserve raised its benchmark interest rate to try to tame inflation.

US crude oil price chart

The central bank’s decision to raise its target rate by 75 basis points to a 3.0% - 3.25% range prompted traders to consider how reduced economic activity could weigh on crude demand.

What is your sentiment on Oil - Brent?

87.18
Bullish
or
Bearish
Vote to see Traders sentiment!

Brent crude oil price chart

At the time of writing, Brent was up 0.13% to $89.66, while WTI was up 0.28% to $83.72, not far off the previous day's close.

The US dollar (USD), however, rallied on the news, which also weighed on oil prices as the dollar-priced commodity became more expensive for holders of other currencies to buy.

 

Will OPEC step in to boost oil prices?

It has prompted the question, will OPEC members step in if oil prices dip lower? Or will the group hold out until their next meeting on 5 October – and perhaps cut output again?

The group has been trying to keep the price of oil above $90 a barrel, recently cutting crude output by 100,000 barrels per day, in a bid to support prices.

Analysts at ING recently pointed out in a note to clients that the decision by OPEC+ has not appeared to have had the intended impact on the market as crude prices continue to trade lower.

Oil - Crude

81.05 Price
-0.470% 1D Chg, %
Long position overnight fee 0.0189%
Short position overnight fee -0.0369%
Overnight fee time 21:00 (UTC)
Spread 0.03

Gold

1,647.55 Price
-0.790% 1D Chg, %
Long position overnight fee -0.0050%
Short position overnight fee 0.0018%
Overnight fee time 21:00 (UTC)
Spread 0.20

Natural Gas

7.09 Price
+0.510% 1D Chg, %
Long position overnight fee -0.1232%
Short position overnight fee 0.0883%
Overnight fee time 21:00 (UTC)
Spread 0.005

Oil - Brent

87.18 Price
-0.540% 1D Chg, %
Long position overnight fee 0.0322%
Short position overnight fee -0.0535%
Overnight fee time 21:00 (UTC)
Spread 0.04

“While on paper the cut is small, in reality, it is even smaller, given that most OPEC+ members are already producing below their target production for October. If this downward pressure continues we cannot rule out OPEC+ holding an emergency meeting, which they have made very clear could happen if necessary.”

Bearish pressures on oil prices

Osama Rizvi, energy analyst and economist at Primary Vision, shared his thoughts on the bearish pressures impacting crude oil prices.

“The rising dollar (USD) due to the Fed's interest rates is affecting oil demand as it gets hard for other countries to buy oil as it is priced in dollars. Secondly, concerning economic data from China, it has also put a damper on prices.”

Bullish factors impacting crude

Rizvi said, however, that despite the lower oil prices, he thinks it is too soon for OPEC to step in.

“It is too early for OPEC to step in as bullish factors still remain such as the escalation in the Ukrainian conflict - and the impending oil embargo on Russia, which will raise supply concerns as the world will have to find 2.4 mbpd of production.

“Prices, for now, will remain range bound. OPEC may only decide to step in if there is an Iranian deal (that I think is highly unlikely to happen) - and if demand goes down drastically. Interestingly both IEA and OPEC see robust demand for this and next year,” Rizvi added.

Further reading

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?


Join the 450.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account

2. Make your first deposit

3. You’re all set. Start trading