Investing.com -- Crude futures fell more than 2% on Monday reversing gains from late last week, amid mounting concerns that an interest rate hike by the Federal Reserve will weigh on energy prices worldwide.
On the New York Mercantile Exchange, WTI crude for November delivery traded between a low of $44.31 and $45.49 a barrel before settling at $44.45, down 1.25 or 2.74% on the session. Despite Monday's sharp moves to the downside, U.S. crude futures remain in a holding pattern. At the end of Monday's session, Texas Long Sweet futures closed in a range between $44 and $47 for the 10th consecutive trading day.
On the Intercontinental Exchange (ICE), brent crude for November delivery wavered between $47.27 and $48.42 a barrel before closing at $47.34, down 1.28 or 2.63% on the session. The spread between the international and U.S. domestic benchmarks of crude stood at $2.89, just above Friday's level of $2.88 at the close of trading.
Fed officials continue to send signals that an interest rate hike could be forthcoming weeks after the U.S. central bank voted to hold its benchmark Federal Funds Rate at its current near-zero level for the 55th consecutive meeting. Speaking exclusively to the Wall Street Journal on Monday, New York Fed president William Dudley said the Fed is on track to hike rates before the end of the year and could reach its targeted goal for inflation at some point in 2016. In its inflation forecasts earlier this month, the Fed estimated that inflation would reach 1.7% by the end of next year and not hit 2.0% until 2018.
It came days after Fed chair Janet Yellen offered her first personal endorsement of a 2015 rate hike since July during hawkish remarks in an appearance at the University of Massachusetts-Amherst last Thursday. While delivering a speech on inflation dynamics at the university's Philip Gamble Memorial Lecture, Yellen noted that the inflation shortfall is likely to be transitory, as one-off factors such as lower energy prices and weaker imports due to a stronger dollar abate. Yellen added that inflation should reach the Fed's 2% target when the labor market returns to full employment.
A rate hike is widely viewed as bullish for the dollar, as foreign investors pile into the greenback in search of higher yields. Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates. A rise in interest rates can also provide downward pressure for equities, providing a negative impact for top energy stocks. When major energy companies are forced to tighten operations, demand for crude could suffer.
Meanwhile, at the 70th session of the United Nation's General Assembly in New York, both U.S. president Barack Obama and Iran president Hasan Rouhani devoted significant portions of their speeches to the ramifications of an impending Iranian Nuclear Deal. While strongly defending the agreement, Obama reiterated that the accord struck in July has "averted" a potential war and will make the world a safer place. Rouhani, meanwhile, suggested that since the U.S. has eased a wide range of sanctions against Iran, it should now focus on implementing the deal.
Iran is reportedly hoarding 30 million barrels of crude ready for export shortly after a deal is implemented. It has been estimated that Iran could increase oil exports by as much as one million barrels per day within a year of the final approval of the agreement.
The deal is widely considered as bearish for crude, which has fallen by roughly 40% over the last year amid a glut of oversupply in global energy markets.