Oil falls on renewed demand concerns, rate hike expectations

Oil falls on renewed demand concerns, rate hike expectations

7 Sep 
Oil prices fell on Wednesday as COVID-19 curbs in top crude importer China and expectations of further interest rate hikes fanned concerns of a global economic recession and lower fuel demand growth.

Brent crude futures fell $1.12, or 1.2%, to $91.71 a barrel after slipping 3% in the previous session. U.S. West Texas Intermediate crude futures declined by $1.25, or 1.4%, to $85.63 a barrel.

Oil pared strong gains made on Monday after the Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPE+, decided to cut output by 100,000 barrels per day in October.

China's stringent zero-COVID policy has kept cities such as Chengdu, with 21.2 million people, under lockdown, curbing people movement and oil demand at the world's second-largest consumer.

Investors are also watching for further interest rate hikes to curb inflation. The European Central Bank is widely expected to lift rates sharply when it meets on Thursday. After the ECB's meeting, a U.S. Federal Reserve meeting will follow on Sept. 21.

A stronger U.S. dollar, which was up about 0.5% on more positive U.S. services industry data, also pressured oil prices. Oil is priced in U.S. dollars, so a stronger greenback makes the commodity more expensive to holders of other currencies.

Lending some support to prices, however, were expectations of tighter oil inventories in the United States.

U.S. crude stockpiles are expected to have fallen for a fourth consecutive week, declining by an estimated 733,000 barrels in the week to Sept. 2.

Crude inventories in the U.S. Strategic Petroleum Reserve (SPR) fell 7.5 million barrels in the week to Sept. 2 to 442.5 million barrels, their lowest since November 1984, according to data from the Department of Energy.

Weekly U.S. inventory reports from the American Petroleum Institute and Energy Information Administration will be released on Wednesday and Thursday respectively, a day later than usual, because of a public holiday on Monday.