Adedapo Adesanya
By Adedapo Adesanya
Oil prices fell more than 5 per cent a barrel on Tuesday on fears that fuel demand could soften as global central banks hike rates to fight surging inflation.
Brent crude futures depreciated by $5.78 or 5.5 per cent to trade at $99.31 a barrel while the United States West Texas Intermediate crude dropped $5.37 or 5.5 per cent to close at $91.64 per barrel.
With inflation near double-digit territory in many top economies, central banks could resort to more aggressive interest rate increases, slowing economic growth and fuel demand.
The European Central Bank (ECB) has been advised by policymakers to include a 75-basis-point interest rate hike among its options for the September policy meeting.
In a Friday speech, US Federal Reserve’s Chair Jerome Powell said that large interest rate hikes could continue and could slow the economy for some time and that rates could be higher for longer.
In addition, the oil market swept aside, for now, concerns that the deadly clashes in Iraq would hurt the country’s oil industry and exports as unrest failed to dent the OPEC nation’s crude exports.
At least 15 people have been killed and scores of others wounded in overnight fighting in the Iraqi capital, following protestors’ storming of the presidential palace on Monday.
Fighting broke out in and around the Green Zone after hundreds of protesters loyal to powerful Shi’ite cleric Moqtada al-Sadar tore down cement barriers and charged through the Republican Palace following the cleric’s announcement on Monday that he would withdraw from politics.
Iraq can ramp up its oil exports and will not decline any requests for more crude, said Mr Alaa Al-Yassiri, director general of state oil marketing company SOMO, adding that it could redirect more oil to Europe if required.
Prices were also pressured by the strong performance of the US Dollar. A stronger greenback makes dollar-denominated oil more expensive for buyers with other currencies.
The American Petroleum Institute (API) reported a slight build this week for crude oil of 593,000 barrels, beating analysts’ prediction. The market will await official figures from the US Energy Information Administration (EIA).
Investors will watch the meeting of the Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, on September 5.
Saudi Arabia last week raised the possibility of production cuts from OPEC+, which sources said could coincide with a boost in supply from Iran should it clinch a nuclear deal with the West.
