By Adedapo Adesanya
After losing more than 3 per cent on Tuesday, the oil market extended losses in the midweek as prices fell further following fears that more aggressive US interest rate hikes would pressure economic growth.
Brent crude futures were down 63 cents or 0.8 per cent to $82.66 per barrel, as US West Texas Intermediate (WTI) crude futures slipped 92 cents or 1.2 per cent to $76.66 a barrel.
Both oil benchmarks had dropped to their lowest in months on Tuesday after comments by US Federal Reserve Chair Jerome Powell that the central bank would likely need to raise interest rates more than expected in response to recent strong data.
The probability that the Fed will raise interest rates by 50 basis points at the next meeting on March 21-22 has now gone. Prior to Mr Powell’s Tuesday testimony before the US Senate, traders put the probability of such a move at a lower level.
The US central bank’s hawkishness put downward pressure on crude oil prices on Tuesday, and it continued into Wednesday.
Oil markets are now concerned that the Fed’s policy may be to raise interest rates higher and for longer, which would stifle economic growth and oil demand.
A stronger US Dollar also capped oil prices earlier in the session, which typically trades inversely with oil, to hit a three-month high against a basket of currencies.
A stronger greenback makes oil and other Dollar-denominated commodities expensive for holders of other currencies.
Also weighing on oil prices on Wednesday was a mixed inventory report from the Energy Information Administration (EIA). The markets initially appeared to interview the weekly inventory report as positive, with a 1.7 million-barrel draw on crude inventory for the week to March 3, compared with a 1.2-million-barrel build the previous week.
Industry data from the American Petroleum Institute (API) on Tuesday showed a decline in crude inventories for the first time after a 10-week build.
Amid the market dilemma, a top global bank, Barclays, slashed its Brent crude oil forecast for 2023 to $92, shaving $6 off its earlier forecast, citing Russian resilience amid sanctions. Barclays also cut its 2023 WTI forecast by $7 to $87 per barrel.
On the supply front, Angola’s secretary of state for oil and gas said there was no need for the Organisation of the Petroleum Exporting Countries (OPEC), to which the African producer is a member, to increase output to make up for Russia’s 500,000 barrel per day cut.
