LONDON – Oil prices fell for the second straight session on Friday, heading for a weekly drop of more than 3%, as a higher-than-expected interest rate hike in the UK and warnings about future rate hikes in the US fueled concerns about demand, according to Reuters.
On Thursday, both crude benchmarks fell by approximately $3 after the Bank of England boosted interest rates by a larger-than-expected half-point.
Norway and Switzerland both raised interest rates.
By 14:10 a.m. Saudi time, Brent crude was down 91 cents, or 1.2 percent, to $73.23 per barrel, while US West Texas Intermediate crude was down $1.22, or 1.8 percent, to $68.29.
“Recession fears have returned as a result of central bank rate hikes and a hawkish Fed,” Tina Teng, an analyst at CMC Markets, said, adding that a stronger dollar was also dragging on pricing.
A rise in the value of the dollar, which has climbed 0.3 percent this week, might dampen demand for oil by making it more expensive for holders of other currencies.
The market is now anticipating the release of Purchasing Managers Indexes from around the world on Friday in order to gain insight into industrial activity and demand trends.
The Energy Information Administration said on Thursday that oil stocks in the United States fell unexpectedly in the previous week, owing to robust export demand and low imports. However, stockpiles of petrol and distillates increased.
As policymakers near the end of their historic round of monetary policy tightening, Federal Reserve Chair Jerome Powell indicated the central bank would hike interest rates at a “careful pace” from here.
Higher interest rates raise the cost of borrowing for firms and consumers, thus slowing economic development and reducing oil demand. Fears of major central banks raising interest rates have clouded the picture for fuel demand for the rest of the year.
“Energy traders are concerned that the Fed and its allies will stymie economic growth in the second half of the year,” said Edward Moya, an analyst at OANDA.
Source: Reuters