Oil prices fall amid FRS decision on interest rates

/By Azernews/

By Nigar Abbasova

Negative dynamics observed in oil prices has strengthened, following the decision of the U.S. Federal Reserve System (FRS) not to raise interest rates, maintaining the low level, they have been at since December 2015.

Global benchmark Brent crude oil September futures were trading at $44.09 per barrel facing a decrease by 2.48 percent on July 27.  West Texas Intermediate (WTI) crude was at $41.97 per barrel.

The price of OPEC basket of fourteen crudes stood at $40.49 a barrel on July 27, compared with $40.62 the previous day.

FRS, the central banking system of the USA, opted to keep rates between 0.25% and 0.5%. This is the fifth consecutive meeting, in which Federal Oil Market Committee (FOMC) left the rates unchanged. FOMC raised its key interest rate from a range of 0% to 0.25% to a range of 0.25% to 0.5% in December 2015 while the previous rise was fixed in June, 2006. Before Britain voted to leave the European Union, the majority of traders believed the Fed would raise interest rates at least once in 2016, according to Bloomberg data. 

Oil prices were also influenced by the data on the increase of crude oil stockpiles in the USA. The volume of oil reserves increased by 1.67 billion barrels last week and amounted to 452,000 barrels, according to the U.S. Department of Energy, Interfax reported.  

Meanwhile, International Fitch rating agency has increased its basic forecast on the average oil price from $35 to $42 per barrel in 2016, TASS reported. The forecasted increase amounted to 20 percent. Forecasted average price for Brent and WTI stands at $40-41 per barrel. Long-term outlook forecasts that the price will reach the level of $65 per barrel. Fitch analysts say that the market will stabilize in the second half of 2016.

Moody in its June report forecasted that the average oil price will increase from $40 to $60 in long-term outlook, while short-term estimates for these crudes stood at $40 in 2016, $45 and $50 in 2017 and 2018 respectively, The Economic Times reported.