Futures on US West Texas Intermediate Crude Oil resumed their slide on Thursday, while hovering above a three-month trough, as markets were concerned a sizable Fed rate hike aimed to curb accelerating inflation would also hamper oil demand.
The latest macro data showed US annual CPI inflation had reached a 40 1/2-year peak at 9.1% in June, while cementing expectations of a super-sized 100 basis point rate hike from the Federal Reserve at its July meeting.
The Fed’s decision is expected to follow a similar move by the Bank of Canada, which surprised markets yesterday.
“A worsening macroeconomic outlook and fears of recession are weighing on market sentiment, while there are ongoing risks on the supply side. For now, weaker-than-expected oil demand growth in advanced economies and resilient Russian supply has loosened headline balances,” the International Energy Agency wrote in its Monthly Oil Market Report.
In June, oil production increased by 690,000 barrels per day due to higher US output, the IEA said.
However, the agency revised down its 2022 oil demand forecast to a 1.7-million barrel per day increase from a 1.8-million barrel per day rise expected in June.
Additional price pressure for oil came on the back of exceptionally strong US Dollar, with the Dollar Index hitting a fresh two-decade high on Wednesday. A stronger dollar tends to make dollar-priced commodities such as oil more expensive for international investors holding other currencies.
Concerns over pandemic-related restrictions in multiple Chinese cities aimed to curb the spread of a highly infectious COVID-19 sub-variant also weighed on oil prices.
As of 7:32 GMT on Thursday WTI Crude Oil Futures were retreating 0.63% to trade at $95.76 per barrel. Yesterday the black liquid slid as low as $93.65 per barrel, which has been its weakest price level since April 11th ($92.92 per barrel).
At the same time, Brent Oil Futures were losing 0.40% on the day to trade at $99.27 per barrel. Yesterday Brent Oil went down as low as $98.32 per barrel, which has been its weakest price level since April 11th ($97.65 per barrel).