By Adedapo Adesanya
Crude oil prices went down on Friday as traders worried that future interest rate hikes in the United States could weigh on demand.
Brent crude futures lost $2.14 or 2.5 per cent to trade at $83.00 a barrel, while the US West Texas Intermediate (WTI) crude shrank by $2.15 or 2.7 per cent to per barrel $76.34.
On a week-on-week basis, Brent fell by 3.9 per cent as the US crude fell by 4.2 per cent.
The market reacted after two US Federal Reserve officials warned additional hikes in borrowing costs are essential to curb inflation.
Speaking on Thursday, Cleveland Fed President Loretta Mester said in a virtual speech to a Global Interdependence Center conference that the US Fed Reserve “has come an appreciable way in bringing policy from a very accommodative stance to a restrictive one, but I believe we have more work to do,”.
“The incoming data have not changed my view that we will need to bring the fed funds rate above 5 per cent and hold it there for some time” in a bid to get inflation back to the central bank’s 2 per cent target.
Earlier in the month, the US central bank opted to moderate the pace of what had been a torrid barrage of rate hikes and lifted its benchmark overnight interest rate by a quarter of a percentage point to the 4.50 per cent-4.75 per cent range.
The central bank also signalled more rate hikes are coming to help lower overly high inflation levels back to the target.
The new sentiments lifted the US Dollar, making oil more expensive for holders of other currencies.
Various signs of ample supply also weighed on the market. Russian oil producers expect to maintain current volumes of crude oil exports, despite the government’s plan to cut oil output in March.
The latest US data supplies, released on Wednesday, showed crude inventories in the week to February 10 rose by 16.3 million barrels to 471.4 million barrels, their highest level since June 2021.
Support came from moves this week by the International Energy Agency (IEA) and the Organisation of the Petroleum Exporting Countries (OPEC) to raise their forecasts for global oil demand growth this year, citing expectations for more Chinese demand.
Also, Saudi Arabia’s energy minister said the current deal by OPEC+, which groups OPEC producers with Russia and others, to cut oil output targets by 2 million barrels per day would be locked in until the end of the year, adding he remained cautious on Chinese demand.
