WTI drops to $88.80, near a weekly low amid the Fed's hawkish remarks

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $88.80 so far on Thursday. WTI prices face some follow-through selling to nearly a weekly low of 88.60 after the Federal Reserve (Fed) held the interest rate unchanged and delivered hawkish comments on Wednesday.

In a press conference, Fed Chairman Jerome Powell reaffirmed the Fed's commitment to achieving 2% inflation and added that the US central bank is ready to raise rates if necessary. That said, the higher for longer interest rate narrative in the US exerts pressure on the oil prices. It's worth noting that higher interest rates raise borrowing costs, which can slow the economy and diminish oil demand.

Saudi Crown Prince Mohammed bin Salman said on Wednesday that OPEC's decision to cut oil production was based on market stability and was not intended to help Russia wage its war in Ukraine. In recent weeks, voluntary oil output cuts by Saudi Arabia and Russia, the world's two largest oil exporters boosted WTI prices. Two nations announced prolonged oil output curbs until the end of 2023. Saudi oil output will be closer to 1.3 million barrels per day through the end of 2023.

Apart from this, the American Petroleum Institute (API) reported on Wednesday that US crude oil inventories fell nearly 5.25M barrels for the week ending September 15 from the previous reading of 1.174M barrels rise. The market consensus expected a 2.7 million-barrel decline. During the same period, EIA reported that crude oil stockpiles declined by 2.135M barrels compared to an increase of 3.954M in the previous week, while the market anticipated a drawdown of 2.2M barrels.

Looking ahead, oil traders will take cues from the US weekly Jobless Claims, the Philly Fed, and Existing Home Sales due later on Thursday. The preliminary US S&P Global PMI for September will be released on Friday. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI prices.