Increased interest rates cause oil prices to continue to decrease

Specifically, Brent oil prices decreased by 0.9%, down to 82.63 USD/barrel, while US WTI oil prices were at 78.96 USD/barrel, down 1.1%.

After two days of meeting, the US Federal Reserve (Fed) decided to raise the basic interest rate by 0.25% to a range of 5.25% to 5.5%, the highest level in the past 22 years. Along with the decision to raise interest rates, the Fed also leaves open the possibility of continuing to increase it once more this year.

Jerome Powell - Chairman of the Fed - said that the US economy needs to slow down and the labor market needs to weaken so that inflation can return to the 2% target of the US Central Bank.

Higher interest rates increase lending costs for businesses and consumers, which could slow economic growth and reduce oil demand.

Meanwhile, data from the US Energy Information Administration (EIA) shows that US crude oil reserves have decreased by 600,000 barrels in the week as of July 21, down from analysts' estimate of a decrease of 2.35 million barrels. Reserves of gasoline and distillate products also decreased with a decrease of 800,000 barrels and 200,000 barrels, respectively.

In addition, the USD is showing an upward trend, recovering from its lowest level in 15 months. The rising USD makes oil more expensive for buyers holding other currencies. This puts pressure on oil prices.

Oil prices have been rising steadily for four weeks, supported by signs of tighter supply, mainly related to production cuts by Saudi Arabia and Russia, as well as the Chinese government's commitment to revive the world's second largest economy.

According to Reuters, while Saudi Arabia will extend production cuts to September, Russia is expected to significantly increase oil production in September, ending a sharp export cut.

Hiroyuki Kikukawa - Chairman of NS Trading - said that the oil market will continue to struggle amid tight global supply and concerns about slowing demand due to economic recession.