And the US Federal Reserve decided on Wednesday to set major interest rates between 5 and 5.25% for the first time since January 2022, expecting two rate hikes until the end of 2023 of 25 points. basis each.
And starting in March 2022, the Fed raised the interest rate 10 times, which caused the annual inflation rate in the United States to drop to 4% last May, after reaching in mid-2022 its highest level in about 4 decades, exceeding 9 percent, but nonetheless It is still far from the US central bank’s 2 percent target.
In an attempt to balance the risks facing the economy and the continued fight against inflation, the Federal Open Market Committee, which sets the interest rate, said in a closing statement to its meeting of the past two days: “Keeping the interest rate target range unchanged allows the committee to assess any additional information and its implications for policy.
And U.S. banks that watch the oil business on Wall Street have lowered their oil price forecasts, suggesting there will be no price hikes in the current year, as JP Morgan cut in its latest report yesterday Wednesday Brent price targets 11 percent for the second half to $82 a barrel.
Earlier this week, Goldman Sachs lowered its oil price forecast for the third time in 6 months, given the abundant supply in the markets, and the uncertainty of the global economy which raises concerns. as for the future of demand, as it expected the price of Brent to reach $86 a barrel next December, against the previously expected $95.
For its part, the Organization of the Petroleum Exporting Countries (OPEC), in its monthly report published on June 13, maintained its expectations for the growth of world oil demand during the current year, at 2, 35 million barrels per day, for the fourth month of Away in 2023 at 1.4 million barrels per day.
While the International Energy Agency, in yesterday’s Oil Market Report on Wednesday, raised its expectations for oil demand growth in the current year to a new record high, supported by growth in Chinese consumption, as she said: “The global demand for oil will increase to 102.3 million barrels per day.” This year, with an expected annual growth of 2.4 million barrels per day, compared to 2.2 million in last month’s estimate.
A step towards measuring the extent of market interaction
In his interview with “Sky News Arabia Economy”, Amer Al-Shoubaki, an international energy consultant, said: “The US Federal Reserve’s decision to fix the interest rate came in line with expectations, as this decision is a step to gauge the extent of market interaction and the extent of the impact of the ten hikes made by the Federal Reserve on the interest rate since the year The past has affected the American banking sector, and as to the impact of the decision on oil prices, we will see more price fluctuations in the coming period, but in general, the impact of oil prices cannot be limited to the interest rate, but there has other factors.
Political dimensions of Jerome Powell’s statement to influence oil prices
Al-Shobaki said that Federal Reserve Chairman Jerome Powell’s statement to expect further interest rate hikes (two hikes until the end of this year, each by a quarter point ), i.e. a tightening of monetary policy, is not promising news for the markets and the global economy, indicating that his statement has a political aspect in addition to the factors, which will affect the oil prices, the economy and the sentiments of dealers and speculators in the oil markets.
As a result, oil prices weren’t affected much in the first session this morning, as the rise was very slight, around half a percent, when it was supposed to rise more if Jerome Powell didn’t hadn’t finished his speech with his expectations for upcoming Fed meetings, according to Shobaki.
Mixed economic indicators
As for other factors that affect oil prices, international energy consultant Al-Shobaki adds: “Economic activity in China has a significant impact on oil prices, as China is expected to account for 50% of the growth demand for oil, but economic activity is growing at a slower pace.” This is what is expected, according to the indices of industrial production and retail sales, which are two important tools for measuring the extent of economic activity.The industrial production index rose less than expected in May by 3.5 percent, compared to the 3.6 percent expected.The retail sales index fell to 13 points while it was in April at 18 points, which will lead to fluctuations in oil prices.
The European Central Bank has also raised interest rates by 25 basis points to the 4% level, an increase which is the eighth consecutive since last year, and markets are eagerly awaiting a meeting of the Bank. Central Japan tomorrow. , as the interest rate is expected to be fixed, which means economic indicators are mixed, according to what Shobaki said.
An expected recession will put pressure on oil until the end of 2023
For his part, Tariq Al-Rifai, Executive Director of the Corum Center for Studies in London, said in exclusive statements to “Sky News Arabia Economy”: “The setting of interest rates by the US Federal Reserve indicates that the rate Inflation is the main reason for the Fed’s approach to raise the interest rate over the past months.In the past, as we now see the inflation rate is subdued, which prompted the Federal Reserve to set interest rates at its last meeting, if the cause of inflation is largely due to the rise in the price of oil, which in turn has caused the prices of other commodities to rise, then we We are now seeing a decline in all commodity prices, including oil, which means the Fed expects US economic growth to slow.
Al-Rifai pointed out that the expected slowdown in economic growth in the United States, as well as the slowdown in Chinese economic activity, stagnation in Germany and the likelihood of other European countries entering recession will put pressure on the oil prices in the next stage, specifically until the end of this year, expecting the price of oil to be lower, ruling out prices rising above $85 a barrel.
Al-Rifai predicted that oil prices would be between $70 and $80 a barrel until the end of this year, but in case the US economy slips into a recession, Al-Rifai expected the prices fall below $70 a barrel.
Limited impact
For his part, Dr. Mamdouh Salameh, a global oil expert residing in London, confirmed in his interview with “Sky News Arabia Economy” that the impact of the US Federal Reserve’s decision not to raise the rate of interest this time is very limited on oil. oil prices and global demand, indicating that despite this, the Fed has warned that it may have to raise the interest rate twice in the current year, giving it time to assess its policy budget and measures to raise interest rates over inflation.
Dr Salama added: “The Federal Reserve’s decision is prompted by indications that inflation’s rise in May may have slowed to just 0.1%, as well as concerns that larger increases could lead to the collapse of a fourth US commercial bank, which could cause a global banking or financial crisis, in addition to However, these concerns are behind the continued pressure on oil prices.
No recovery in oil demand
Dr. Carol Nakhle, CEO of Cristol Energy, said: “The US Federal Reserve paused at its last meeting by not raising interest rates, in a bid to gauge the extent to which the economy has reacted to its rate hike decisions. over a relatively long period, and therefore the impact of this needs more time to appear.
In her interview with Sky News Arabia Economy, Dr Nakhla explained that she does not expect a recovery in oil demand following the Federal Reserve’s decision to fix the interest rate, which it sees as a temporary move and will not have a noticeable impact on markets, especially as the Federal Reserve has said it will continue to attract interest in the coming months.
Read the Latest World News Today on The Eastern Herald.
