Oil Prices Unchanged Despite ECB’s Decision as Demand Concerns Persist

Oil prices remained stable on Thursday, following the European Central Bank’s (ECB) decision to slow down interest rate hikes. However, the prices failed to recover much of the more than 8% decline witnessed this week, as demand worries in major oil-consuming countries continued to weigh down the market.

At 1228 GMT, Brent futures were up 28 cents, equivalent to a 0.39% increase, and traded at $72.61 per barrel. Meanwhile, the US West Texas Intermediate (WTI) crude rose 6 cents, or 0.09%, to $68.66.

In its latest move to tackle stubbornly high inflation in the euro zone, the ECB eased the pace of its interest rate hikes on Thursday, and left its options open for future adjustments. The 25-basis-point increase to the ECB’s three policy rates was the smallest since the rate hikes began last summer.

According to ING, “Today’s decision signals that the ECB has entered the final stage of its current tightening cycle.”

Despite this, demand concerns in major oil-consuming countries and fears over the US economy triggered a plunge in oil prices this week. This fall was exacerbated by weak manufacturing growth in China, the world’s largest oil importer. 

The prices further declined after the US Federal Reserve raised interest rates on Wednesday, dampening near-term economic growth prospects.

However, the oil market received some support from the Fed’s suggestion that it may pause further interest rate hikes. This is to give officials time to assess the fallout from recent bank failures and to gain clarity on the dispute over raising the US debt ceiling.

Oil broker PVM’s Tamas Varga noted, “With the Fed possibly pausing, the debt ceiling hopefully resolved this month, the OPEC+ cut felt in a few weeks’ time and global demand picking up in the second half of the year, we are growing in conviction that the question is not how low oil prices will fall, but how long.”

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, known as OPEC+, began voluntary output cuts at the beginning of this month. 

Russia’s Deputy Prime Minister Alexander Novak said on Thursday that the country was complying with its voluntary pledge to cut oil output by 500,000 barrels per day from February to the end of the year.

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