US Economy Worries Trigger 3% Fall in Crude Oil Prices

By Adedapo Adesanya

Crude oil prices fell by 3 per cent, their lowest in two weeks, on Wednesday, with Brent shedding $2.45 or 3 per cent to trade at $80.60 per barrel, and the West Texas Intermediate (WTI) down by $2.41 or 3 per cent to quote at $74.05 a barrel.

Investors became more concerned that recent data will prompt more aggressive interest rate increases by central banks, pressuring economic growth and fuel demand.

This came as minutes from the latest US Federal Reserve meeting showed that most Fed officials agreed that the risks of high inflation remained a key factor shaping monetary policy and warranted continued rate hikes until it was controlled.

“Almost all participants agreed that it was appropriate to raise the target range of the federal funds rate 25 basis points,” with many of those saying that would let the Fed better “determine the extent” of future increases, said the minutes, which were released on Wednesday.

The US central bank delivered a string of 75-basis-point and 50-basis point rate hikes in 2022 in its battle to curb inflation in the world’s largest economy that had climbed to 40-year highs. The policy rate is currently in the 4.50 per cent -4.75 per cent range.

The meeting minutes suggest that while there will be increases, analysts took this as an indication that the US may have hit a rate that is close to acceptable to continue reducing inflation.

Worries also came from the stronger US Dollar, which is not of help for oil. The US Dollar Index gained for a second straight session, making greenback-denominated oil more expensive for holders of other currencies.

Other US economic reports, however, showed some troubling signs for the world’s biggest oil consumer.

Sales of existing homes fell in January to their lowest since October 2010.

US crude stockpiles rose by 9.9 million barrels last week, according to market sources citing American Petroleum Institute (API) figures on Wednesday.

US oil inventories have climbed every week since mid-December, worrying investors about demand in the country.

Official data from the Energy Information Administration (EIA) is due Thursday due to a delay over Monday’s President’s Day holiday in the US.