Adedapo Adesanya
By Adedapo Adesanya
Oil slid on Monday as economic data in the United States had investors bracing for more interest rate hikes from the US Federal Reserve to fight inflation, which could slow economic growth and oil demand.
Brent futures fell by 71 cents or 0.9 per cent to settle at $82.45 a barrel, while the US West Texas Intermediate (WTI) crude fell by 64 cents or 0.8 per cent to settle at $75.68 per barrel.
New orders for key US-manufactured capital goods increased more than expected in January while shipments rebounded, suggesting that business spending on equipment picked up at the start of the first quarter.
It joined solid consumer spending and robust employment data in painting an upbeat picture of the world’s largest economy.
The string of strong data has raised the risk that the Federal Reserve could hike interest rates to a higher level than currently estimated.
The US central bank has raised its policy rate by 450 basis points since last March from near zero to a 4.50 per cent-4.75 per cent range.
It is expected to deliver two additional rate hikes of 25 basis points in March and May, though financial markets are betting on another increase in June.
As a key economy, the US data drives the market, with Federal Reserve Governor Philip Jefferson saying on Monday that inflation remained stubborn, though slower-growing wages might help slow prices in those parts of the economy as well.
The US central bank is moving to make clear progress back towards its 2 per cent inflation target.
Adding to global oil demand worries is the rising US-China tensions. On Sunday, White House National Security Adviser Jake Sullivan said China has not moved toward providing Russia with lethal aid for use against Ukraine and added it has made clear behind closed doors that such a move would have serious consequences.
Losses were limited by oil supply concerns after Russia halted exports to Poland via a key pipeline.
Russia, meanwhile, halted supplies of oil to Poland via the Druzhba pipeline after Poland said it had delivered its first Leopard tanks to Ukraine.
On Monday, Russian oil pipeline monopoly Transneft said it started pumping oil from Kazakhstan to Germany via Poland through the Druzhba pipeline while halting deliveries to Poland.
Russia had announced plans this month to cut oil exports from its western ports by up to 25 per cent in March versus February, exceeding previously planned production cuts of 5 per cent.
