Oil slipped on Monday as concerns about a global economic slowdown and possible further interest rate hikes from the U.S. The Federal Reserve weighed on prices, offsetting forecasts of tighter supplies and OPEC+ output cuts.
Slowdown Hurting Fuel Demand
Fears of a further slowdown hurting fuel demand grew after data on Friday showed U.S. inflation still outpacing the central bank’s 2% target and stoked expectations it would hike interest rates again. Brent crude futures were down 4 cents to $75.37 a barrel by 0800 GMT after settling up 0.8% on Friday. U.S. West Texas Intermediate crude was at $70.55 a barrel down 9 cents, after closing 1.1% higher in the previous session.
Brent fell for the fourth straight quarter by the end of June while WTI notched a second quarterly drop as the world’s top two economies, the U.S. and China, lost speed in the second quarter. “Hawkish commentary on rates continues to raise concerns of the demand outlook weighing on prices,” National Australia Bank analysts said in a note.
Strengthen Greenbacks
Higher interest rates could strengthen the greenback, making commodities more expensive for holders of other currencies, and also dampen oil demand. Factory activity growth in China, the world’s largest crude importer, also slowed in June as sentiment and recruitment cooled on the back of sluggish market conditions, according to the Caixin/S&P Global private sector survey.
Still, some analysts expect supplies to tighten and push prices higher in the second half after top exporter Saudi Arabia pledged an extra 1 million barrels per day output cut in July, while the U.S. is gradually replenishing its Strategic Petroleum Reserve.
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Source: Reuters
