Oil tumbles as hawkish Fed eclipses inventory draw
2023-06-23 01:10:27 Source: Financial circles share to:
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The decline in oil prices extended even further after U.S. data showed a sharp drop in crude stockpiles amid global warnings about the threat of inflation.
WTI plunged more than 4% to a one-week low, with the overall risk-off market trend overshadowing positive U.S. inventory data. Fed Chairman Jerome Powell reiterated that view on Thursday, after saying Wednesday that interest rates need to be raised to curb inflation. In addition, both the UK and Norway raised interest rates on Thursday. The tightening of policy globally has investors increasingly concerned that calls for lower inflation could lead to a slowdown in the global economy as consumers pull back on spending amid high interest rates.
U.S. crude oil inventories fell by about 4 million barrels last week, according to data released by the U.S. government. But traders said that was still not enough to offset the negative sentiment in the market.
“For WTI, the market has been scrambling around $70,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. Fundamental factors are inconsistent with daily trading trends. Until the macro and fundamentals match, the market will still be volatile.
Oil prices have basically fluctuated in a range since the beginning of May. On the one hand, interest rate hikes have brought pressure and supply is also strong. On the other hand, OPEC+ has taken measures to support oil prices. Traders are now keeping a close eye on the outlook for the second half of the year, which could tighten even if growth in China is lackluster, according to the International Energy Agency.