Oil prices fall, WTI below $90 as Fed warns of higher rates

investing.com:

Investing.com-- Oil prices fell in Asian trade on Thursday as the Federal Reserve’s warning on higher U.S. interest rates saw investors lock-in more recent profits, although expectations of tight supply still presented a positive outlook for crude. 

Concerns over higher rates saw West Texas Intermediate crude futures (WTI) lose the $90 per barrel level, while Brent oil futures also fell sharply from a 10-month high hit earlier this week, as markets were slapped with a bout of profit taking.

This was fostered by fears of the Fed, as the central bank kept rates steady on Wednesday but warned that sticky inflation could still elicit at least one more rate hike this year. The bank also flagged fewer rate cuts next year.

The Fed’s comments boosted the dollar and spurred losses across most financial markets. Brent oil futures fell 0.4% to $93.08 a barrel, while WTI futures fell 0.6% to $89.17 a barrel by 20:17 ET (00:17 GMT), extending losses into a third straight session after soaring to 10-month highs earlier.  

Markets feared that higher interest rates will weigh on economic activity, potentially denting crude demand. Beyond the Fed, interest rate decisions from the Bank of England and the Bank of Japan are also on tap this week.

But the catalysts that drove crude to 2023 highs- particularly, the prospect of tighter supply- still remained in play, with some analysts warning that oil prices could push even higher. 

Government data showed on Wednesday that U.S. crude inventories shrank slightly less than expected in the week to September 15. 

But more positive was an unexpected draw in gasoline and distillates, as refiners slowed down production with the end of the summer season. 

The overall draw in inventories was also