Oil Prices Plunge over US Fed Rate Hike Fears
Crude oil prices plunge on Monday as recent economic data from the United States (US) – the world’s largest oil consumer – suggests that the US Federal Reserve will maintain its hawkish stance on interest rates, supporting the dollar near multi-week highs.
According to market data, the International benchmark Brent crude traded at $82.31 per barrel, a slowdown of 0.62% from the closing price of $82.82 a barrel in the previous trading session.
At the same time, American benchmark West Texas Intermediate (WTI) traded at $75.91 per barrel, a 0.54% decrease after the previous session closed at $76.32 a barrel.
The 0.6% monthly increase in the US core personal consumption expenditures price index in January, up from a 0.4% monthly gain in December and higher than the market estimate of a 0.4% increase, increased investor fears of interest rate hikes for at least the first half of this year, weighing on oil prices.
These fears of a rate hike have led to a stronger dollar, putting more pressure on dollar-indexed oil prices. The US dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc, rose 0.11% to 105.29.
Despite supply concerns, price declines emerged after Russia announced a plan to cut crude oil production by 500,000 barrels per day in March. Russian Deputy Prime Minister Alexander Novak also said earlier in February that his country plans to sell 80% of its crude oil and condensate and 75% of its refined products to ‘friendly’ countries, Novak said.
Last week, Brent Fell
Brent oil decreased 0.6% in the week ending Feb. 24 over fears that further interest rate hikes in the US would dampen oil demand in the world’s largest oil consumer. International benchmark Brent crude was trading at $82.64 per barrel on Friday, posting a 0.6% fall from the Monday session that opened at $83.15 a barrel.
The American benchmark West Texas Intermediate (WTI) registered at $75.74 per barrel at the same time on Friday, decreasing 1.2% relative to the opening price of $76.69 a barrel on Monday.
Prices began the week on a positive note over hopes of stronger demand in China, the world’s largest oil-importing country. The aviation sector in the country has almost healed the wounds of the pandemic period, surging 34.8% year on year, and recovering by 74.5% compared to the same period in 2019.
However, further gains were limited by the US decision to release oil from the country’s Strategic Petroleum Reserves (SPR). The plan includes the sale of 26 million barrels, which are set to be delivered to the market from April 1 to June 30. # Oil Prices Plunge over US Fed Rate Hike Fears
