The Federal Reserve interest rate hike Wednesday took nobody by surprise. The markets reacted accordingly with mostly strong performances all around.
Oil prices, however, continued their descent, falling more than 3 percent on Wednesday and breaking a two-day rebound after reports by the U.S. government showed a surprise weekly build in crude inventories and on the back of the Fed decision to raise interest rates for the first time in nine years.
Ahead of the Fed's rate decision, the U.S. Energy Information Administration released data that showed in increase in crude inventories of 4.8 million barrels last week—against expectations of a 1.4 million barrel drawdown in a recent Reuter’s poll.
U.S. WTI crude oil futures settled nearly 5 percent lower at $35.52 a barrel and are trading at $35.38 a barrel in Asia.
Brent crude oil futures settled over percent lower at $37.19 a barrel after hitting $37.11 a barrel, near an 11-year-low. Brent oil is now trading around $37 a barrel.
End of Financial Crisis
The rate hike is seen as an indication that the U.S. economy had largely overcome the 2007-2009 financial crises. The dollar firmed modestly after the rate rise. Based on interest rate futures markets, traders expected a second rate hike in April.
Analysts expect the higher U.S. rates to support the dollar, which should in turn pressure oil prices and make them costlier for holders of other currencies.
Chris Jarvis, president and senior analyst at Caprock Risk Management in Maryland, "I don't view the FOMC statement as being all that supportive and now that we have the announcement behind us, it's back to fundamentals."