Oil falls 2% under pressure from Chinese demand concerns, US interest rate hike

Oil prices fell, yesterday, Thursday, by about two percent, with China sticking to the zero-Covid policy and with raising US interest rates, which led to the rise of the dollar, which reinforced fears of a global recession that reduces demand for fuel, but fears of lack of supplies limited the losses.

Brent crude futures fell $1.49, or 1.5 percent, to settle at $94.67 a barrel. US West Texas Intermediate crude futures fell $1.83, or two percent, to $88.17 a barrel when they settled.

Both benchmarks rose more than $1 a barrel on Wednesday, supported by another drop in US oil inventories, despite the US central bank raising interest rates by 75 basis points and President Jerome Powell’s announcement that it was too early to consider halting interest rate hikes.

This sent the dollar higher, Thursday, with Powell indicating that US interest rates are likely to peak beyond investors’ current expectations.

A stronger dollar reduces demand for oil, as the cost of fuel increases for buyers in other currencies.

However, oil price losses were limited due to expectations that supplies in the market are heading to become tight in the coming months.

The EU embargo on Russian oil is expected to start on December 5, and a ban on oil product imports will follow in February.

A Reuters survey also showed that production from the Organization of the Petroleum Exporting Countries (OPEC) fell in October for the first time since June.

OPEC and its allies, including Russia, decided to reduce the target production level by two million barrels per day, starting in November. (Reuters)