Oil Rally Loses Steam as Traders Await Interest Rate Decision

Article content

(Bloomberg) — Oil cooled after a strong run of gains that carried crude into overbought territory, with traders turning their attention to an interest-rate decision by the Federal Reserve.

We apologize, but this video has failed to load.

Try refreshing your browser, or
tap here to see other videos from our team.

Oil Rally Loses Steam as Traders Await Interest Rate Decision Back to video

West Texas Intermediate’s more-active May contract fell about 2% to near $81 a barrel. Crude on Tuesday settled at its highest closing price since late October.

The pullback comes after crude prices were pushed into overbought territory and algorithms reached their maximum long positions. With the tailwind of the automated buying diminishing, momentum for crude may be poised to flip to the downside, said Daniel Ghali, a commodity strategist at TD Securities.

The US Energy Information Administration said Wednesday that US crude inventories fell 1.95 million barrels, roughly in line with the 1.5 million-barrel drop estimated by the American Petroleum Institute a day earlier. Gasoline stockpiles shrank by 3.31 million barrels.  

After starting 2024 in a tight trading range that had stifled volatility, crude broke out in recent weeks amid supply cuts delivered by OPEC+ and geopolitical risks, including Ukrainian drone strikes on Russian refineries. Broadly positive growth data from China earlier this week also drove gains.

The US central bank is expected to hold rates steady for a fifth consecutive meeting later Wednesday, although policymakers may give hints about when they will be ready to pivot to easing. Carlyle Group Inc.’s Jeff Currie said oil may rise well above the current consensus of $70 to $90 a barrel if the Fed moves to cut interest rates in the coming months.

To get Bloomberg’s Energy Daily newsletter into your inbox, click here.