Brent oil touches lowest since March as rate hike bets intensify

Brent for September settlement lost 1.9% to $97.69 a barrel at 8:24 a.m. in New York.
Image: Akos Stiller/Bloomberg

Brent oil retreated after a bumper US inflation print bolstered expectations that the Federal Reserve will make further aggressive interest rate hikes.

The global crude benchmark fell as much as 2.4%, touching its lowest level since March, while West Texas Intermediate also fell. Wider markets were softer on Thursday, while the dollar resumed its advance, weakening commodities priced in the currency. Traders have shifted toward expectations of an historic one percentage-point Fed interest rate hike later this month.

Time spreads are signaling scarce supply, however and Goldman Sachs Group Inc. said the market is “screaming” tightness. The bank said a large selloff this week has been driven by low liquidity and technical factors, with Brent down more than 20% from its high in June.

President Joe Biden landed in the Middle East on Wednesday just as a report showed inflation soared to a four-decade high last month, reflecting higher costs including gasoline, which are a central issue in US elections. High US gasoline prices could be starting to take their toll on consumption, with demand falling last week to the lowest level for this time of the year since 1996.

“Concerns about the impact of high inflation on economic growth and oil demand are visibly growing,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. “Outright prices and the structure are out of sync.”

Prices
  • Brent for September settlement lost 1.9% to $97.69 a barrel at 8:24 a.m. in New York
  • WTI for August delivery slipped 2.1% to $94.30 a barrel
    • WTI earlier briefly traded below its 200-day moving average, which is at $93.41. Brent is near its equivalent marker at $97.05

US gasoline demand fell last week to 8.06 million barrels a day, also below the same week in 2020, according to the Energy Information Administration. Aside from the same period two years ago, the four-week rolling average of gasoline demand was the lowest on a seasonal basis since 2000. Crude stockpiles rose by 3.25 million barrels.

Renewed Covid-19 outbreaks in China have also weighed on the outlook for oil demand. Shanghai’s flareup appears to be easing, but other regions are being locked down and facing restrictions to curb the spread of the virus. Nationwide, 292 cases were recorded on Wednesday.

© 2022 Bloomberg

COMMENTS   0

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: