Oil prices fall as concerns over higher interest rates crimp demand

Brent futures for March delivery fell 43 cents to $79.22 a barrel, a 0.5% drop, by 0522 GMT. U.S. West Texas Intermediate crude fell 36 cents, or 0.5%, to $74.27 per barrel

Oil prices
Reuters
3 min read Last Updated : Jan 10 2023 | 12:25 PM IST

Oil edged lower on Tuesday on expectations that further interest rate hikes in the United States, the world's biggest oil user, will slow economic growth and limit fuel demand.

Brent futures for March delivery fell 43 cents to $79.22 a barrel, a 0.5% drop, by 0522 GMT. U.S. West Texas Intermediate crude fell 36 cents, or 0.5%, to $74.27 per barrel.

Both benchmarks climbed 1% on Monday, after China, the world's biggest oil importer and second-largest consumer, opened its borders over the weekend for the first time in three years.

Two United States Federal Reserve officials this week expected the Fed policy rate - now at 4.25% to 4.5% - to need to rise to a 5% to 5.25% range to bring higher inflation rates under control.

"(The expectation) is more hawkish than what markets are pricing at the moment (4.75-5% range)," said Yeap Jun Rong, Market Analyst at IG in a note, adding that the upcoming speech from Fed chair Jerome Powell later on Tuesday could mirror the hawkish tone with some pushback as well.

Fed policymakers said fresh inflation data out later this week will help them decide whether they can slow the pace of interest rate hikes at their upcoming meeting, to just a quarter point increase instead of the larger jumps they used for most of 2022.

China also issued a second batch of 2023 crude import quotas, according to sources and documents reviewed by Reuters on Monday, raising the total for this year by 20% from the same time last year.

But analysts warned that China's demand revival may play limited role to drive up oil prices under the global economic downward pressure.

"The social vitality of major Chinese cities is rapidly recovering, and the restart of China's demand is worth looking forward to. However, considering that the recovery of consumption is still at the expected stage, the oil price will most likely remain low and range-bound," said analysts from Haitong Futures.

Separately, U.S. crude oil stockpiles likely fell 2.4 million barrels, with distillate inventories also seen slightly down, a preliminary Reuters poll showed on Monday. [ENERGYUSA]

Industry group American Petroleum Institute is due to release data on U.S. crude inventories at 4:30 p.m. EDT (2030 GMT) on Tuesday.

The Energy Information Administration, the statistical arm of the U.S. Department of Energy, will release its own figures at 10:30 a.m. (1430 GMT) on Wednesday.

 

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

Topics :Brent crudeOil PricesOil demand

First Published: Jan 10 2023 | 12:25 PM IST

Next Story