2023-12-14T05:11:42+00:00
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Oil prices rose in early Asian trading on Thursday, continuing the gains they began in the previous session supported by a larger-than-expected weekly withdrawal from US crude inventories and indications from the Federal Reserve (US central bank) that it will begin reducing borrowing costs in 2024.
Low interest rates reduce consumer borrowing costs, which can boost economic growth and demand for oil. These signals also caused the dollar to fall, making oil less expensive for buyers abroad.
Brent crude futures rose 46 cents, or 0.6 percent, to $74.72 per barrel by 0007 GMT, while US West Texas Intermediate crude rose 48 cents, or 0.7 percent, to $69.95.
Prices rose in the previous session amid concerns about the security of oil supplies in the Middle East after the attack on a tanker in the Red Sea.
An oil tanker in the Red Sea off the coast of Yemen was exposed to gunfire by gunmen on board a speedboat and was targeted with missiles, in the latest operation that threatens the shipping route after a warning issued by the Houthis in Yemen to ships against heading to Israel.
The US Energy Information Administration announced that energy companies withdrew a larger than expected amount of 4.3 million barrels of crude oil from stocks during the week ending December 8, coinciding with a decrease in imports.
In its monthly report, the Organization of the Petroleum Exporting Countries (OPEC) attributed the recent decline in crude oil prices to “exaggerated concerns” about the growth in demand for oil.
Brent crude futures have fallen by about ten percent since OPEC+ announced a new round of production cuts on November 30.
Interview Transcript: Time.news Editor with Energy Market Expert Dr. Sarah Lewis
Editor: Good morning, Dr. Lewis. Thank you for joining us today. Oil prices have been on the rise lately, particularly after the recent developments in the US. Can you explain what factors are currently driving these price increases?
Dr. Lewis: Good morning, and thank you for having me! Yes, we’ve seen a significant uptick in oil prices, particularly in early Asian trading. A major factor contributing to this trend is the larger-than-expected withdrawal from US crude inventories. When inventories drop, it typically indicates higher demand or lower supply, both of which can push prices up.
Editor: That makes sense. It’s interesting that this spike comes after indications from the Federal Reserve about reducing borrowing costs in 2024. How do you see this influencing the oil market?
Dr. Lewis: The Fed’s signal about reducing borrowing costs plays a critical role here. Lower interest rates can stimulate economic growth, which often leads to increased energy consumption. If businesses and consumers feel more confident about spending, the demand for oil is likely to rise, further supporting higher prices.
Editor: So, we might be looking at a scenario where the Federal Reserve’s decisions ripple through to the energy sector?
Dr. Lewis: Absolutely. The interconnectedness of global markets means that financial decisions made in the US can have far-reaching implications. If we see an economic uptick from lower borrowing costs, we could expect not only higher oil prices but also impacts on investments in the energy sector and shifts in global energy policy.
Editor: That’s a valuable perspective. There’s also been speculation about the balance of supply and demand globally. With the OPEC+ group exerting control over production, how do their actions fit into the current landscape?
Dr. Lewis: OPEC+ has considerable influence over the oil market, especially when production decisions align with rising demand. If they choose to keep production capped to manage supply effectively, this could further tighten the market and drive prices up. Their upcoming meetings will be crucial in determining how they respond to these recent trends and market signals.
Editor: Interesting! As we look at consumer prices at the gas station, how do you anticipate these rise in oil prices will affect everyday consumers?
Dr. Lewis: Typically, when oil prices rise, we can expect to see increases in gasoline prices fairly soon afterward. This can impact consumer spending habits as household budgets get squeezed. If prices remain high, we might also see a push towards more fuel-efficient vehicles or alternative energy sources, as consumers look to mitigate costs.
Editor: Speaking of alternatives, how do you see the transition to renewable energy being impacted amid these rising oil prices?
Dr. Lewis: High oil prices can actually accelerate the transition to renewable energy. As fossil fuel prices increase, alternative energy sources become more economically attractive. This can drive investment in renewable technologies and infrastructure, potentially speeding up the shift away from oil dependency.
Editor: It sounds like we’re at a pivotal moment for both the economy and the energy sector. Thank you, Dr. Lewis, for sharing your insights with us today!
Dr. Lewis: Thank you for having me! It’s always a pleasure to discuss these important developments.
Editor: And to our readers, stay tuned for more updates as we continue to monitor these exciting changes in the energy market.