In part, the bounce in oil prices is due to a weaker dollar that was pressured by a more dovish Fed
Oil prices bounced on Thursday after a three-day slide, as risk demand returned to global financial markets after the Federal Reserve kept benchmark interest rates on hold at its latest meeting on Wednesday. The central bank also hinted it might be done raising interest rates for now but was careful not to rule out another increase. Powell added that the FOMC is not considering or even discussing rate reductions at this time.
Following the meeting, oil futures dipped to local lows around $84.60 to finish around the lower end of the range. However, Brent crude managed to attract demand and bounced on Thursday to add more than 1% during the Asian hours. Last week, oil failed to hold above the $90 figure and has been struggling since then as geopolitical concerns keep waning, thus easing worries about supply shortage.
Elsewhere, the US Energy Information Administration said in its weekly report that US crude oil inventories increased by 800,000 barrels for the week ended October 27. Gasoline inventories increased by 0.1 million barrels from last week and distillate fuel inventories decreased by 0.8 million barrels and are about 12% below the five year average for this time of year.
In part, the bounce in oil prices is due to a weaker dollar that was pressured by a more dovish Fed. The USD index struggles to attract renewed demand on Thursday, digesting the central bank’s new message on rates. Should the greenback stay offered in the near term, Brent may see a more sustained recovery, with the initial upside target arriving at $86. On the downside, the nearest support could be expected in the $85.25 area, followed by the $85 level.