Oil falls after US interest rate hike

Oil prices pared earlier gains and fell on Thursday, after a day of sharp declines caused by US interest rate hikes, but the attention was still focused on the supply shortage.

Brent crude futures fell 45 cents, or 0.4 percent, to $118.06 a barrel, while West Texas Intermediate crude futures fell 44 cents, or 0.4 percent, to $114.87 a barrel.

The two crudes remained largely within the previous session’s price range.

Prices fell more than 2 percent on Wednesday after the US Federal Reserve raised interest rates by 75 basis points, the largest increase since 1994.

The dollar index fell from its highest level since 2002 on Wednesday, easing downward pressure on oil prices. A rising dollar makes oil more expensive for holders of other currencies and limits demand.

Investors remained focused on tight supplies and a recovery in demand after Western sanctions curbed Russian oil exports.

In Libya, production has collapsed to between 100,000 and 150,000 barrels per day, an oil ministry spokesman said on Tuesday, a small percentage of the 1.2 million barrels per day production last year.

This is hurting already tight supply, while the International Energy Agency said it expects demand to increase further in 2023, rising by more than 2 percent to 101.6 million barrels per day.

Prices are also expected to receive support from the recovery in oil demand in China with the easing of anti-Covid-19 restrictions.