Oil prices fell for the third consecutive day on Thursday due to concerns about the economic impact of rising interest rates, which offset the positive effects of a surprise drop in U.S. crude inventories and hopes for Chinese demand.
The remarks made by U.S. Federal Reserve Chair Jerome Powell this week, indicating that interest rates might need to be raised more than previously expected in response to recent strong data, continued to weigh on oil and other risk assets due to their potential impact on economic and demand growth.
Brent crude fell by 34 cents, or 0.4%, to $82.32 a barrel, while U.S. West Texas Intermediate (WTI) crude declined by 11 cents to $76.55. Both benchmarks experienced declines of between 4% and 5% over the previous two days.
According to Tamas Varga of oil broker PVM, concerns about a recession are becoming more prominent. This comes after a sharp drop in oil prices on Tuesday, marking the largest daily fall since early January, following remarks from U.S. Federal Reserve Chair Jerome Powell about the possibility of more interest rate hikes due to strong economic data. Suvro Sarkar, lead energy analyst at DBS Bank, noted that oil prices are still affected by Powell’s hawkish tone, with the potential for a 50 basis points rate hike instead of the anticipated 25 basis points. However, there was some support for oil on Wednesday as official figures showed a decrease of 1.7 million barrels in U.S. crude inventories, ending a 10-week streak of increases. Analysts are also pointing to accelerating Chinese oil imports in February as a sign of a rebound in fuel demand after Beijing’s removal of COVID-19 controls, offering further support for oil prices.
