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Crude oil futures closed lower on Wednesday, moving away from five-month highs following back-to-back session gains, weighed down by U.S. dollar strength even after some gains were pared following the Federal Reserve’s policy announcement.
The policy-setting Federal Open Market Committee maintained its position its main monetary policy rate target remained unchanged in the 5.25%-5.5% range and left the median estimate of rates by the end of the year at a level that implies rate cuts of three-quarters of point for 2024.
The Fed’s rate decision was within expectations and the impact on oil markets was limited, oil analyst Andrew Lipow told Reuters.
Meanwhile, the U.S. Energy Information Administration reported last week that national crude oil inventories fell by 2 million barrels more than expected, which Kpler analyst Matt Smith attributed to refinery ramp-ups and strong crude oil exports.
Nymex first-month crude (CL1:COM) for April delivery, which expires today, was closed -2.1% at $81.68/barrel, and first-month May Brent crude (CO1:COM) ended -1.6% at $85.95 a barrel, a day after both benchmarks achieved their best results since late October.
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Carlyle Group’s Jeff Currie told Bloomberg this week that commodities are in a “classic late-cycle rally” and he sees crude oil rising well above the current consensus of $70-$90 a barrel if the Fed will decide to cut interest rates in the coming months.
“I want to be long oil and the rest of the commodity complex in this environment,” Currie told Bloomberg TV in his first interview since joining Carlyle from Goldman Sachs.
“The upside here is significant,” Currie said, as China’s move to support manufacturing and the rebuilding of European inventories all point to stronger commodity prices, particularly oil and copper.