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Oil Futures Settle Lower As Inventory Data, Fed Rate Hike Weigh

Crude oil prices drifted lower on Wednesday amid concerns about the outlook for energy demand after the Federal Reserve's announcement of a sharp hike in interest rates raised fears about a recession.

Data from the U.S. Energy Information Administration (EIA) showing higher inventories across the board also weighed on oil prices.

The central bank raised its target range for the federal funds by 75 basis points to 3 to 3.25%, and signaled further sharp hikes in the coming months.

The move marks the third straight 75 basis point rate hike by the Fed and lifts rates to their highest level since early 2008.

With inflation remaining elevated, the Fed also said it anticipates that ongoing interest rate increases will be appropriate. Fed officials expect to raise rates to 4.4% by the end of the year, well above the 3.4% forecast in June.

Fed officials expect to increase rates to 4.6% by the end of 2023 before eventually scaling back rates in 2024 and 2025.

West Texas Intermediate Crude oil futures for November ended lower by $1.00 or about 1.2% at $82.94 a barrel, coming off a high of $86.68.

Brent crude futures dropped $0.54 or about 0.6% to $90.08 a barrel.

The central bank officials now expect GDP to inch up by just 0.2% in 2022 compared to the 1.7% jump forecast in June.

The median forecast for GDP growth in 2023 was also lowered to 1.2% from 1.7% in June. GDP is expected to grow by 1.7% in 2024 and by 1.8% in 2025.

Fed officials expect consumer prices to spike by 5.4% this year before price growth slows to 2.8% in 2023 and 2.3% in 2024.

The EIA data showed crude stockpiles in the U.S. increased by 1.1 million barrels in the week ended September 16th versus an expected increase of 2.2 million barrels.

Gasoline inventories increased by 1.6 million barrels last week, while distillates stockpiles rose by 1.2 million barrels.

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