By Adedapo Adesanya
Crude oil witnessed over 2 per cent drop on Tuesday on signals that central banks may not be done with interest rate hikes.
It was observed that Brent crude futures went down by $1.92 or 2.6 per cent to sell at $72.26 a barrel, while the US West Texas Intermediate (WTI) crude futures dropped $1.67 or 2.4 per cent to settle at $67.70 a barrel.
The President of the European Central Bank (ECB), Ms Christine Lagarde, said on Tuesday that stubbornly high inflation will require the bank to avoid declaring an end to rate hikes.
The ECB has raised rates at each meeting over the past year, taking its deposit rate to 3.5 per cent, and promised more tightening as soon as July as it attempts to curb inflation still running at three times its 2 per cent target.
Markets see the ECB’s deposit rate peaking at 4 per cent, suggesting that after July’s 25 basis point increase, another move is likely, either in September or October.
In the US, consumer confidence increased in June to the highest level in nearly one and half years amid renewed labour market optimism.
However, it is likely that the country’s central bank, the Federal Reserve, will have to continue raising interest rates to slow demand in the overall economy.
The US central bank, which has raised its policy rate by 500 basis points since March 2022, signalled this month that two additional rate hikes were warranted this year.
Higher interest rates can weigh on economic activity and oil demand.
The market, meanwhile, has shrugged off the aborted mutiny by mercenary group Wagner in Russia at the weekend, with Russian oil loadings having remained on schedule.
Crude oil inventories in the US decreased this week by 2.408 million barrels, the American Petroleum Institute (API) data showed on Tuesday, after falling by 1.246 million barrels in the week prior.
Analysts were expecting a smaller 1.467-million-barrel draw in US crude-oil inventories. The total number of barrels of crude oil gained so far this year is nearly 36 million barrels according to API data, although the net draw in crude inventories since April is more than 8 million barrels.
The market will wait for data from the US Energy Information Administration (EIA) on Wednesday to confirm the level of the crude stockpiles.
