The price of oil has retreated to near $47 (Dh172.6) a barrel after the US Federal Reserve raised interest rates. Image Credit: AP

Seoul: Oil retreated to near $47 (Dh172.6) a barrel after the US Federal Reserve raised interest rates, stoking fears over economic growth at a time when investors face a supply glut.

February futures in New York slid as much as 2.5 per cent, after the front-month contract snapped a three-session 12 per cent slump on Wednesday. Traders are avoiding risk assets as Chairman Jerome Powell failed to quell concerns the Fed’s policy will choke global growth. Meanwhile, inventories at a key US storage hub rose to the highest level since January, adding to speculation output cuts by Opec will be undermined by shale supplies.

Crude’s set for its worst quarterly drop in four years despite an accord between Opec and its allies to cut 1.2 million barrels per day (bpd) of production from January. While Saudi Arabia’s Energy Minister Khalid Al Falih said he’s certain the deal will be extended in April, the assurance coming even before the pact has gone into effect only highlighted the prevailing anxiety in the market. Meanwhile, global investors are concerned the Fed isn’t finished raising rates.

“The market had wanted to receive a more definitive signal that the Fed is done boosting rates and it fell short of satisfying investors,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc. in Seoul, said by phone. “We may see oil prices hover in $40 range as the market continues to battle with uncertainties over a supply glut and slowing growth.”

West Texas Intermediate (WTI) for February delivery lost as much as $1.21 to $46.96 a barrel on the New York Mercantile Exchange, and was at $47.05 at 1:41pm in Seoul. The January contract expired on Wednesday after gaining 96 cents to $47.20. Total volume traded on Thursday was about 16 per cent below the 100-day average.

Brent for February settlement dropped $1.08, or 1.9 per cent, to $56.16 a barrel on London’s ICE Futures Europe exchange. The contract rose 1.7 per cent to close at $57.24 on Wednesday. The global benchmark crude traded at a $9.11 premium to WTI.

Stockpiles at Cushing rose for a fourth consecutive week by 1.09 million barrels last week, Energy Information Administration data showed on Wednesday. While nationwide inventories shrank by 497,000 barrels last week, the drop was smaller than a 2.5 million-barrel decrease expected in a Bloomberg survey of traders.

On Wednesday, Minister Al Falih said the current price dip isn’t based on supply and demand of oil, but stems in part from factors including geopolitics, US interest rates, the strength of the greenback and investor speculation. Still, he added that the group will “need more time” for production curbs to balance the market.

In America, policymakers scaled back the number of rate increases they expect next year to two, from three in September, according to their median forecast. That’s still more than what investors expect. Powell repeatedly called the outlook for next year “positive,” though the central bank did slightly lower the forecast for growth in 2019 to 2.3 per cent from 2.5 per cent in September.