Oil drops as more rate hikes overshadow tightening fuel market - BNN Bloomberg

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Oil fell after Federal Reserve Chair Jerome Powell said interest rates will go higher than earlier projected, overshadowing tightening supply.

West Texas Intermediate futures dropped below US$89 a barrel after rising four per cent over the previous two sessions. Powell said it's “very premature to be thinking about pausing” after the Fed hiked rates again by 75 basis points. The dollar jumped, making commodities priced in the currency less attractive. Major central banks are seeking to tame rampant inflation, which is weighing on energy demand.

“Rising anxiety about stalling growth will inevitably impact global oil demand and another downward revision in the next set of forecasts is not a far-fetched idea,” said Tamas Varga, an analyst at brokerage PVM Oil Associates. “The battle between bearish demand outlook and bullish supply expectations intensifies.”

An uncertain outlook for China, the world's biggest crude importer, has added to headwinds for oil. The country's top health body said the nation's zero-tolerance approach remains the overall strategy to fighting COVID-19 after unverified social media posts buoyed hopes the policy would be eased. Oil has lost almost a third of its value since early June as concerns over a global economic slowdown filter through the market. Still, there is uncertainty about supply heading into winter, with OPEC+ implementing sizable output cuts and the European Union set to sanction Russia crude flows.WTI for December delivery declined 1.5 per cent to US$88.69 a barrel at 10:16 a.m. in London.The Middle Eastern Dubai crude benchmark has been pressured in recent days too.

 

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