Oil rises as supply concerns offset demand fears after rate hike

Oil rose in choppy trading as the market weighed the prospect for more rate hikes against persistently tight supplies.

West Texas Intermediate futures traded near US$117 after bouncing of a session low of US$112.31 while Brent climbed above US$119. The Fed raised interest rates by 75 basis points as it seeks to combat surging inflation. The US central bank signaled a willingness to accept a recession and a rise in unemployment in its resolve to contain elevated inflation.

Despite the increasing risks for the economy, crude is up more than 50 per cent this year following a tightening of energy markets after Russia’s invasion of Ukraine. Global supply will struggle to meet rising demand in 2023, the International Energy Agency said in a monthly report on Wednesday. Goldman Sachs Group Inc. said on Thursday that the market has tightened quicker than they were expecting.

“There is a churn to the market, today,” said John Kilduff, a partner at hedge fund Again Capital in New York. “The continued supply concerns remain supportive, but the economic data are moves by the Fed and other central banks is holding back further gains.”