Oil Prices Drop as Markets Fret Over Rate Hike
Global prices of crude oil declined Wednesday as investors fret that the Federal Reserve will keep interest rates higher for longer. Brent crude oil is down 0.9% at $82.05 a barrel while West Texas Instrument (WTI) declines 1.1% to $75.52.
Ahead of the release of its latest minutes, investors are concerned that economic resilience will drive the Federal Reserve’s open market committee (FOMC) to be more aggressive on interest rates.
“Markets continue to come to terms with expectations of a more hawkish Fed, following a raft of economic data suggesting the Fed still has quite a bit of work to do,” says ING in a note.
Later Wednesday, the release of the Federal Open Market Committee meeting minutes should give investors a peak at the Fed’s thinking.
Brent crude futures is trading around $83 per barrel on Wednesday, remaining under pressure ahead of the release of the Federal Reserve’s latest minutes. Major US retailers including Walmart and Home Depot also issued dire economic warnings as high inflation continued to pressure consumers and squeeze corporate margins.
Keeping a floor under prices, Russia has recently announced plans to cut output by 500,000 barrels a day in March or about 5% of total production in retaliation to Western sanctions.
Still, the US plans to impose more penalties on Russia for the invasion of Ukraine, with measures that could target Russia’s energy sector. On the demand side, the IEA and OPEC raised their forecast for 2023 oil demand growth, citing higher consumption from China.
WTI crude futures held recent declines to trade around $76 per barrel on Wednesday, remaining under pressure ahead of the release of the Federal Reserve’s latest minutes that may provide clues on the trajectory of interest rate hikes in the US.
