Oil prices fell sharply last week despite OPEC+ agreed to maintain production cuts in 2024, losing around 7% last week following the announcement by the US Federal Reserve on the policy rates.
The fall accelerated on Wednesday after the Fed held interest rates firm at the meeting in January and said that it will likely keep the rate steady in March as the central bank needed to see a sustainable inflation rate at a lower level.
Both international benchmark Brent crude and the West Texas Intermediate (WTI) lost about 7% last week as high interest rates dampen economic growth and oil demand.
On Thursday last week, it was reported that the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, had kept its output policy unchanged. The total agreed production cut is now at 2.2 million barrels per day. The group will meet again in March to decide whether it would want to extend the voluntary oil production cuts.
Meanwhile, job data on Friday showed that U.S. employers added more jobs in January than economists had expected. This also reduces the chance of the Fed cutting rates in the near-term.
Demand in the U.S. also declined after an outage at BP’s 435,000 barrel-per-day oil refinery in Whiting, Indiana last week caused the unit that contributes 2.4% of refinery production in the U.S. to cease operation.
Despite all geopolitical tensions around the world, it fails to spark a sustainable run in oil prices as the main focus is looking to see a recovery in China’s economy, which is the world’s second largest oil consumer by a country.