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Oil Prices Decline Amid US Growth Concerns and Abundant Crude Supply

Early trade on Thursday saw a drop in oil prices as investors processed the likelihood of the U.S. Federal Reserve postponing a potential interest rate cut until December. Additionally, the market was weighed down by ample U.S. crude and fuel stocks.

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Brent crude futures dipped by 37 cents, equivalent to 0.5%, settling at $82.23 a barrel by 0655 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude futures experienced a decline of 34 cents, or 0.4%, reaching $78.16. Both benchmarks had shown an increase of approximately 0.8% in the preceding session.

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The Federal Reserve opted to maintain steady rates during Wednesday’s session and postponed the commencement of policy easing, potentially until December. This decision comes amid concerns that higher borrowing costs could impede economic growth and subsequently limit oil demand.

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Fed Chair Jerome Powell noted during a press conference following the conclusion of the central bank’s two-day policy meeting that inflation had decreased without causing significant harm to the economy. He added that there was no indication this trend couldn’t continue.

Regarding supply, U.S. crude inventories surged beyond expectations last week, primarily driven by a rise in imports. Additionally, fuel inventories saw a greater-than-anticipated increase, as per data from the Energy Information Administration released on Wednesday.

Further contributing to the downward pressure on prices was a pessimistic report from the International Energy Agency, which cautioned about an oversupply in the near future. This contrasts sharply with the optimistic report from OPEC+ earlier in the week, which maintained forecasts for a strengthening demand.

Traders are also monitoring ongoing discussions for a ceasefire in Gaza, the resolution of which could alleviate concerns about potential disruptions in the oil-producing region.

In a separate incident, Iran-allied Houthi militants claimed responsibility for minor watercraft and missile attacks that impacted a Greek-owned coal carrier near Yemen’s Red Sea port of Hodeidah. These attacks are part of a series targeting international shipping in the Red Sea region since November, in solidarity with Palestinians amidst the conflict between Israel and Hamas.

Late Wednesday, the Palestinian militant group Hamas issued a statement emphasizing their “positivity” in ceasefire negotiations. U.S. Secretary of State Antony Blinken reported that Hamas had proposed several modifications to a U.S.-supported ceasefire proposal, with mediators committed to bridging the gaps.

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