Oil prices fall, investors expect big Fed rate hike

Storage tanks are seen at Marathon Petroleum’s Los Angeles refinery, which processes domestic and imported crude oil into California Air Resources Board (CARB) gasoline, CARB diesel fuel and other petroleum products, in Carson, California, United States, March 11, 2022. Photo taken with a drone. REUTERS/Bing Guan/File Photo

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NEW YORK, Sept 20 (Reuters) – Oil prices fell on Tuesday, following declines in other risky assets as the dollar remained strong and investors anticipated further interest rate hikes from the central bank intended to curb inflation.

The US Federal Reserve is expected to raise interest rates another 75 basis points on Wednesday to contain inflation. These expectations weigh on equities, which often move in parallel with oil prices. Other central banks, including the Bank of England, are also meeting this week.

Rising 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. Read more

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“The oil market is caught between downside worries and upside hopes. Worries are driven by aggressive monetary tightening in the US and Europe, which increases the likelihood of a recession and could weigh on the outlook for demand for oil,” said Commodities Manager Giovanni Staunovo. analyst at UBS.

Brent crude futures settled $1.38, or 1.5%, at $90.62 a barrel, while U.S. West Texas Intermediate crude for October delivery ended at $84.45 , down $1.28, on the day it expired. The more active November contract settled at $1.42 at $83.94 a barrel.

Both Brent and WTI are on track for their worst quarterly percentage declines since the start of the COVID-19 pandemic. Brent crude hit around $139 a barrel in March, its highest level since 2008.

“The dollar is key and the Fed is key; they’re going to kill demand for anything inflationary,” said Robert Yawger, director of energy futures at Mizuho in New York.

Oil markets also reacted to weak consumption in the United States and China. In the United States, motorists drove less in July than the previous month, a second consecutive monthly decline, due to high gasoline prices. Retail gasoline prices retreated from their peak as demand slipped.

“We’re going into rotation season here, so it’s neither driving season nor heating season for the next six to seven weeks,” Yawger said.

U.S. crude oil inventories are estimated to have risen by around 2 million barrels last week, according to a Reuters poll. Read more

A document from the Organization of the Petroleum Exporting Countries (OPEC) and its Russian-led allies showed the group fell short of its August production target of 3.58 million barrels per day (bpd). , or about 3.5% of global oil demand. Read more

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Reporting by Shadia Nasralla; Additional reporting by Isabel Kua; Editing by Mark Potter, David Goodman, Will Dunham, David Gregorio and Jonathan Oatis

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Thomson Reuters

David Gaffen oversees a North American oil and gas writing and reporting team; he previously worked at The Wall Street Journal and TheStreet.com

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