New York, September 21 (BNA): Oil prices fell on Tuesday, after other risky assets fell, as the dollar remained strong and investors expected more interest rate hikes by the central bank aimed at calming inflation.
The US Federal Reserve is likely to raise interest rates by another 75 basis points on Wednesday to curb inflation. These forecasts weigh on stocks, which often move in tandem with oil prices. Reuters reported that other central banks, including the Bank of England, are also meeting this week.
Higher interest rates supported the dollar, which remained near a two-decade high against its peers on Tuesday, making oil more expensive for holders of other currencies.
“The oil market is stuck between downside fears and upside hopes. The fears are driven by strong monetary tightening in the US and Europe, which increases the potential for a recession and may affect the outlook for oil demand,” said Giovanni Stonovo, commodities. Analyst at UBS.
Brent crude futures closed down $1.38, or 1.5%, to $90.62 a barrel, while US West Texas Intermediate crude for October delivery closed at $84.45, down $1.28, on the day of its expiration.
The most active November contract settled down $1.42 to $83.94 a barrel.
Brent and WTI are on track for their worst quarterly decline in percentage terms since the start of the COVID-19 pandemic. Brent crude hit about $139 a barrel in March, its highest level since 2008.
“The dollar is the key, the Fed is the key; they will kill the demand for anything inflationary,” said Robert Yoger, director of energy futures at Mizuho in New York.
Oil markets were also reacting to weak consumption from the US and China. US motorists fell in July from the previous month, the second consecutive monthly decline, due to higher gas prices. Retail gas prices have retreated from their peaks as demand has fallen.
“We’re going to start the shift season here, so it’s not the driving season or the heating season for the next six to seven weeks,” Jauger said.
A Reuters poll showed that US crude oil inventories rose last week by about two million barrels.
A document from the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia showed that the group failed to meet its August production target of 3.58 million barrels per day – about 3.5% of global oil demand.
MI