By Adedapo Adesanya
Oil prices fell by over 3 per cent on Monday after the United States service sector data raised worries that the Federal Reserve could continue its aggressive policy tightening path.
Brent crude futures declined by $2.89 or 3.4 per cent to trade at $82.68 a barrel, while the US West Texas Intermediate crude (WTI) fell by $3.05 or 3.8 per cent to $76.93 a barrel.
US services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy as it braces for an anticipated recession next year.
The survey from the Institute for Supply Management (ISM) on Monday followed news last Friday that the economy continued to create jobs at a solid clip in November, with wage growth accelerating.
The ISM said its non-manufacturing PMI increased to 56.5 last month from 54.4 in October. It was boosted by a surge in business activity to an 11-month high.
The market went southwards as this indicated that the Federal Reserve would continue hiking interest rates and lift its policy rate to a higher level than the recently projected 4.6 per cent, where it could stay for some time.
Supporting the market earlier, the Organization of the Petroleum Exporting Countries and allies, including Russia, together called OPEC+, agreed on Sunday to stick to their October plan to cut output by 2 million barrels per day from November through 2023.
OPEC+ had cut output because of a weaker economic outlook which has been in decline due to slower Chinese and global growth and higher interest rates.
The 23-member group of oil producers decided to keep the policy unchanged. Its key ministers will meet again on February 1 for a monitoring committee, while a full meeting is scheduled for June 3-4.
On Friday, G7 nations and Australia agreed to a $60 per barrel price cap on Russian seaborne crude oil in a move to deprive President Vladimir Putin of revenue while keeping Russian oil flowing to global markets.
However, the price cap’s effect didn’t show any effect on the market during Monday’s session.
In a positive sign for fuel demand in the world’s top oil importer, more Chinese cities eased COVID curbs over the weekend.
Business and manufacturing activities in China have been hit this year by strict measures to curb the spread of the coronavirus.
