Crude Oil Market Down After US Fed Chief Comments

March 8, 2023
crude oil market

By Adedapo Adesanya

The crude oil market fell on Tuesday after comments from US Federal Reserve Chair Jerome Powell stoked rate hike fears, with Brent crude futures shedding $2.89 or 3.4 per cent to settle at $83.29 a barrel, as the US West Texas Intermediate (WTI) crude futures dropped by $2.88 or 3.6 per cent to close at $77.58 per barrel.

Mr Powell told Congress that the US central bank would likely need to increase rates more than expected in light of recent strong economic data.

This is in response to recent strong data and is prepared to move in larger steps if the incoming information suggests tougher measures are needed to control inflation.

He said, “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.”

Mr Powell also said the US apex bank might return to larger rate increases than the quarter-percentage-point steps officials had been intending to use going forward.

His comments triggered drops in most financial and commodity markets, with the oil markets not exempted.

The remarks also boosted the US Dollar, which jumped more than 1 per cent to a three-month month high, weighing on oil, which is priced in the American currency, by making it more expensive for buyers paying with other currencies.

The Dollar index rose as high as 105.65, up 1.3 per cent on the day and the highest since December 6, while the Euro, Pound Sterling, Yen, and the Australian Dollar, among others, dropped.

More pressure came from a contraction in China’s exports and imports in January and February, including crude oil imports, despite a lifting of COVID-19 restrictions.

China’s exports and imports for the January-February period fell, pointing to continued weakness in foreign demand.

This is a different outcome after data earlier this month showed that China’s factory activity rose for the first time in seven months while manufacturing activity expanded at the fastest rate since 2012.

However, prices were supported by forecasts for tighter supply and higher demand.

US crude production and demand will rise in 2023 as Chinese travel drives consumption, the US Energy Information Administration (EIA) said in its Short-Term Energy Outlook.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

Leave a Reply

nigerian bourse
Previous Story

Nigerian Bourse Closes Flat as Market Struggles to Find Direction

deposit old Naira notes
Next Story

Naira Tumbles at Parallel Market, Peer-to-Peer, Spot Market

Latest from Economy

Don't Miss