Oil prices ease 1% after US Fed leaves interest rates unchanged

Oil prices ease 1% after US Fed leaves interest rates unchanged

Oil prices fell about 1% on September 20, extending earlier declines, after the U.S. Federal Reserve left interest rates unchanged as widely expected.

The Fed held interest rates steady but stiffened its hawkish stance, with a further rate increase projected by the end of the year and monetary policy kept significantly tighter through 2024 than previously expected.

As they did in June, Fed policymakers still see the central bank's benchmark overnight interest rate peaking this year in the 5.50%-5.75% range, just a quarter of a percentage point above the current range.

Interest rate hikes to tame inflation can slow economic growth and reduce oil demand.

Brent futures for November delivery fell 68 cents, or 0.7%, to $93.66 a barrel by 2:09 p.m. EDT (1809 GMT), while U.S. West Texas Intermediate crude (WTI) for October delivery fell 68 cents, or 0.8%, to $90.52.

The WTI contract for October expires on Wednesday. WTI crude futures for November, which will be the next front-month, was down about 70 cents to $89.80.

Despite the price decline, both Brent and WTI remained in technically overbought territory for a 14th straight day, which would be the longest streak for Brent since 2012 and WTI since 2018.

Energy markets had little reaction to U.S. energy data showing crude inventories fell in line with expectations last week.

That crude stock draw was driven by strong oil exports, while gasoline and diesel inventories drew down as refiners began annual autumn maintenance, the U.S. Energy Information Administration said in a weekly report. [EIA/S]

Crude inventories fell by 2.1 million barrels last week, compared with analysts' expectations in a Reuters poll for a 2.2 million-barrel drop.

U.S. gasoline futures slid to their lowest almost two weeks, cutting the gasoline crack spread, a measure of refining profit margins, to its lowest since December 2022.

In Britain data showed a surprise drop in inflation in August, as the consumer price index fell by 0.1 percentage point to 6.7%, its lowest since February 2022. Goldman Sachs said it expects the Bank of England to keep interest rates unchanged on Thursday as a result of the fall.

In Japan, exports fell in August for a second straight month, weighed by declines in China's demand for steel and heavy oil and stoking fears of a downturn in the face of elevated global interest rates.

(Additional reporting by Robert Harvey in London, Yuka Obayashi in Tokyo, Emily Chow in Singapore and Nicole Jao in New York; Editing by Marguerita Choy and David Gregorio)