Oil prices closed lower on Wednesday for the second consecutive day, amid growing concerns that the Federal Reserve’s aggressive interest rate hikes may hurt the economy and dampen demand for oil. Despite a more-than-expected decline in US crude inventories, investors continued to worry that higher interest rates could hurt oil consumption. Both WTI and Brent crude futures were down at $76.66 per barrel and $82.66 per barrel, respectively.
Federal Reserve Chairman Jerome Powell signaled a rate hike in his address to Congress on March 2, stating that the Fed would accelerate raising interest rates to curb inflation. Powell also indicated that the Fed had yet to decide on the size of the rate hike at its March meeting, which would depend on the labor market and inflation data. Investors are wary that the Fed may raise interest rates faster if the data suggests it’s necessary.
The concerns about the impact of the Fed’s interest rate acceleration overshadowed the positive impact of the US Energy Information Administration’s report, which revealed a 1.7 million barrel decline in US crude stockpiles last week, higher than the 700,000 barrel increase expected by analysts.
Barclays has lowered its oil price forecast for this year due to a larger-than-expected increase in Russian crude oil production. The bank has predicted Brent and WTI crude oil prices to be $92 and $87 per barrel, respectively, down from the earlier forecasts of $98 and $94 per barrel, respectively. However, Barclays warned that the market could face a shortage of 500,000 bpd in the second half of the year due to increased demand from China following the country’s full reopening, while the expansion of non-OPEC oil production may slow down.
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Thursday, March 9, 2023