Oil rises 1% to snap 3-day losing streak after US Fed, BoE hold key rates unchanged; Brent at $85/bbl

The Bank of England (BoE) held interest rates at 15-year high – mark of 5.25 per cent at its latest meeting on Thursday, the second straight month of steady rates after 14 back-to-back hikes. 

Brent crude futures were up 91 cents, or 1.08 per cent, at $85.54 a barrel, while US West Texas Intermediate crude futures gained 83 cents, or 1.03 per cent, to $81.27 a barrel. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a November 17 expiry, were last trading 0.56 per cent higher at ₹6,800 per bbl, having swung between ₹6,694 and ₹6,843 per bbl during the session so far, against a previous close of ₹6,762 per barrel.

“Asset markets reacted positively to the Fed yesterday, and I think oil has followed that by moving a bit higher,” said Callum Macpherson, head of commodities at Investec.

U.S. policymakers struggled at a two-day policy meeting this week to determine whether financial conditions may be tight enough already to control inflation, or whether an economy that continues to outperform expectations may need still more restraint.

The Bank of England held interest rates at 15-year highs of 5.25% at its latest meeting on Thursday, the second straight month of steady rates after 14 back-to-back hikes.

But it also stressed that it is not expecting to make rate cuts any time soon.

“Inflation is still too high. We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target,” Bank of England Governor Andrew Bailey said.

Elsewhere in the U.S., new unemployment claims increased slightly to 217,000 in the week to Oct. 28, according to Labor Department data released on Thursday, but showed few signs of significant slowdown.

“The world’s biggest economy remains resilient. That much was acknowledged by the Fed as they left benchmark rates untouched,” Tamas Varga, analyst at broker PVM, said.

In Europe, a contraction in manufacturing activity in the euro zone deepened in October, with its Purchasing Managers’ Index (PMI) falling by 0.3 points on the month to 43.1. A score of below 50 signals contraction.

Investors will also be watching for developments in the Middle East, which have kept oil markets on edge as a wider conflict could disrupt supplies around the region.

Fighting raged on around Gaza City on Thursday as advancing Israeli tanks and troops encountered fierce resistance from Hamas militants.

more to come

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Updated: 02 Nov 2023, 08:24 PM IST