Oil prices rise after Fed holds interest rates steady

Oil prices rose on Thursday after the US Federal Reserve held interest rates steady at its latest policy meeting. Brent, the benchmark for two thirds of the world’s oil, was trading 1.25 per cent higher at $85.88 a barrel at 4.22pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 1.24 per cent at $81.68 a barrel. On Wednesday, Brent closed 0.46 per cent lower at $84.63 a barrel while WTI was down 0.72 per cent at $80.44 a barrel. The Fed on Wednesday left interest rates unchanged between 5.25 per cent and 5.5 per cent for a second time but did not rule out a rate increase in the coming months. The central bank said it was considering “the extent of additional policy firming that may be appropriate to return inflation to 2 per cent over time”. “It is clear the Fed does not know when we will feel the full impact of their tightening cycle and that they will go meeting by meeting in deciding if inflation is warranting further rate hikes,” said Edward Moya, senior market analyst at Oanda. “Fed Chair [Jerome] Powell tried to talk a hawkish game but he wasn’t convincing enough,” Mr Moya said. Brent has given up most gains since October 7 when Hamas, which rules Gaza, attacked southern Israel, killing about 1,400 people and taking more than 200 hostages. Israel retaliated with air strikes and a total siege of the enclave, with the Palestinian death toll exceeding 8,000. BMI, a Fitch Group company, raised its Brent crude forecast for 2023 to $84 a barrel, from $83. The research company now expects Brent to trade at $85 a barrel next year, up from its previous estimate of $84. “The revision reflects the current and expected price impacts stemming from the Israel-Hamas war and how the war unfolds will be a key determinant of price action over the coming quarters,” BMI said in a research note on Thursday. On the supply side, Iran's oil production reached 3.4 million barrels per day, according to the country’s Oil Minister Javad Owji. Iran, an Opec member, has increased production and exports in recent months despite US sanctions. The country’s output stood at about 3.1 million bpd in September, up from 2.55 million bpd in 2022, Opec data showed. Tehran’s oil exports have faced restrictions since 2018 after the US withdrew from a nuclear agreement reached in the 2015. The subsequent reinstatement of sanctions on the country has rattled its economy and led to social unrest.