OIL FUTURES: Crude tests two-week lows after Fed announces largest rate hike in 28 years

Crude oil futures settled near two-week lows June 15 as demand concerns came into focus following the largest US Federal Reserve interest rate hike in 28 years.

NYMEX July WTI settled down $3.62 at $115.31/b and ICE August Brent declined $2.66 to $118.51/b.

Crude futures traded sharply lower into the market settle after the Federal Open Market Committee announced a 75 basis point hike in its target interest rate. The hike, while widely expected following a higher-than-expected May inflation report June 10, was the largest since 1994 and marks an acceleration in the Fed's plan to tame rising prices and slow economic growth.

A few analysts warned that an increasingly hawkish monetary policy risks tipping the country into recession.

"Many more rate hikes will be demanded in the short term to get a degree of control over inflation before it spirals out of control. A soft landing is looking increasingly unlikely as well, with recession indicators starting to flash as interest rate expectations are raised," OANDA Senior Market Analyst Craig Erlam said in a note.

"The rally over the last month has been intense and the economic fears we're seeing now appear to have taken some of the heat out of it," Erlam added.

Oil prices clawed back some losses in aftermarket trade as the dollar retreated following the Fed announcement. The ICE Dollar Index fell to 104.71 in afternoon trading, down from a 20-year-high close of 105.518 on June 14.

NYMEX July RBOB settled 9.96 cents lower at $3.8942/gal while July ULSD climbed 15.3 cents to $4.5470/gal.

A counter-seasonal build in US crude inventories added further pressure on oil prices.

US commercial crude stocks climbed 1.96 million barrels to 418.71 million barrels in the week to June 10, putting them 13.9% behind the five-year average for this time of year.

The counter-seasonal build came in above market expectations. An American Petroleum Institute report released late-June 14 said US crude inventories rose 736,000 barrels in the week ended June 10, while analysts surveyed by S&P Global Commodity Insights June 13 had pointed to a 1.1 million-barrel draw over the period.

An unexpected decline in refinery demand contributed to rising stockpiles. Total refinery net crude inputs edged down 70,000 b/d to 16.32 million b/d, and utilization dropped 0.5 percentage point to 93.7% of capacity.