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Oil Prices Plunge Over $2 as Federal Reserve’s Rate Hike Fears Drag Demand

Crude oil futures suffered a significant blow on Tuesday (March 7) following comments from Federal Reserve Chairman, Jerome Powell, signaling an acceleration of interest rate hikes to counter inflation. As investors became wary of the impact on the economy and demand for oil, the market witnessed significant pressure from the strengthening US dollar and weak economic data from China, the world’s leading oil importer.

Both Brent and WTI crude futures experienced a decline of over 3%, the steepest single-day percentage drops since January 4 this year.

  • WTI crude futures dropped by $2.88, or 3.6%, settling at $77.58 a barrel.
  • Brent crude futures fell $2.89, or 3.4%, closing at $83.29 a barrel.

Again Capital analyst, John Kilduff, noted that Powell’s signaling of an aggressive rate hike had led investors to avoid risky assets, causing the dollar index to rise by more than 1% to a three-month high. The stronger dollar made crude oil contracts, priced in dollars, more expensive for investors holding other currencies.

In his statement to the Senate Banking Committee on Monday, Powell stated that the latest US economic data was stronger than expected, leading to a prediction that the Fed’s terminal rate would be higher than anticipated. He emphasized the Fed’s commitment to combatting inflation and noted that though inflation has slowed down from its peak last year, the process of reaching the 2% target is far from over.

Investors weighed in with a 70% prediction that the Fed would increase interest rates by 50 basis points to a range of 5.00-5.25% at its March 21-22 meeting, up from 31% on Monday. The Chinese Customs Office’s release of weak economic data, indicating a decline of 6.8% in exports and 10.2% in imports in the January-February period, also contributed to the market’s pressure.

Investors are awaiting the weekly crude stocks report from the US Energy Information Administration (EIA) on Wednesday. The oil industry remains uncertain about the future of oil prices, which will depend on the Fed’s future interest rate decisions and the global economic recovery.

The Spot Market is Open

Wednesday, March 8, 2023

Updated at


Crude Oil




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