Crude Oil prices gained momentum after the FED rate hike of 75bps

The oil prices faced heat and significantly dropped on account of US FED again hiking interest rates
which could slow down the global recovery and cut down fuel demand. Even the sluggish recovery of
the Chinese economy has been a growing concern on the market sentiments. The growth was just
mere 0.4% year-on-year, weighed down by COVID-19 lockdowns, a weak property sector and
cautious consumer sentiment.

However, the prices gained more $1/barrel on Thursday after the FED announcement. This was on
account of improved risk appetite among investors and a rebound in gasoline demand in the United
States supported prices.

Investors recession fears weakened with the ongoing strong U.S. earnings and less aggressive Fed
rhetoric on rate hikes, and this also led to a rally in the crude market. A rate hike of 75 bps was in
line with the expectation to cool the inflation, however, this also caused a drop in dollar.

A weaker US dollar in turn would make it cheaper for the countries buying crude oil in dollars.
U.S. crude exports reached a record 4.5 million bpd as WTI traded at a steep discount to Brent as
against the estimated 1 million barrel, while gasoline demand increased by 8.5%. US has become the world’s largest petroleum exporter with a combined gross export of crude oil and refined products stood at a record 10.9 million barrels a day.

The tight supply is also fuelled by Russia cutting its main gas link to Europe to 20% capacity which
would lead to switching to crude oil from gas, and eventually increasing oil prices in the short term.
Russia agreed only to supply oil to the countries that did not impose a price cap on its oil. Along with
this, in recent news, European Union allowed Russian state-owned companies to supply oil to third
world countries under an adjustment of sanctions agreed by member states to limit risks to global
energy security. 

Libya’s crude oil exports can be the ray of sunshine amid the current bearish market sentiments as
the output could ease the tightness on the supply. Libya’s National Oil Corporation has aimed to
again produce 1.2 million barrels per day (bpd) in two weeks.

Brent crude futures for September rose $1.13, or 1.1%, to $107.75 a barrel after gaining $2.22 on
Wednesday while U.S. West Texas Intermediate (WTI) crude futures for September was at $98.53 a
barrel, up $1.27, or 1.3%, after rising $2.28 in the previous session.