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Oil prices slump as investors fear Fed rate hikes will hurt demand

Commodities Jun 23, 2022 03:35PM ET
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© Reuters. FILE PHOTO: Sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant/

By Laila Kearney

NEW YORK (Reuters) -Oil prices dropped by nearly $2 a barrel on Thursday after another round of remarks from Federal Reserve Chair Jerome Powell fanned worries U.S. interest rate hikes would slow economic growth.

Brent crude futures settled at $110.05 a barrel, falling $1.69, or 1.5%. U.S. West Texas Intermediate (WTI) crude futures settled at $104.27 a barrel, down $1.92, or 1.8%.

Powell said the Fed's focus on curbing inflation was "unconditional" and the labor market was unsustainably strong, comments that stoked fears of more rate hikes.

Investors have been paring positions in risky assets as they assess whether inflation-fighting central banks could push the world economy into recession with higher interest rates.

"If the U.S., and the rest of the world goes into a recession, you can significantly impact demand," said Houston oil consultant Andrew Lipow.

Also, high gasoline prices could be starting to slow demand, said Robert Yawger, director of energy futures at Mizuho in New York.

"That's definitely worked its way into the conversation," said Yawger, adding he thought gasoline still had room to rise. U.S. retail prices are currently averaging $4.94 a gallon, down about 10 cents from the peak, according to AAA.

Major U.S. oil refiners and Energy Secretary Jennifer Granholm emerged from an emergency meeting over the issue with no concrete solutions to lower prices, according to a source familiar with the discussions, but the two sides agreed to work together.

The most recent estimates by the American Petroleum Institute, according to market sources, showed U.S. crude and gasoline inventories rising last week, which also weighed on prices, Yawger said.

Official weekly estimates for U.S. oil inventories were scheduled to be released on Thursday but technical problems will delay those figures until next week, the U.S. Energy Information Administration said, without giving a specific timeline.

OPEC and allied producing countries including Russia will likely stick to a plan for accelerated output increases in August in hopes of easing crude prices and inflation as U.S. President Joe Biden plans to visit Saudi Arabia, sources said.

The group known as OPEC+ agreed at its last meeting on June 2 to boost output by 648,000 barrels a day in July, or 7% of global demand, and by the same amount in August, up from the initial plan to add 432,000 bpd a month over three months until September.

Oil prices slump as investors fear Fed rate hikes will hurt demand
 

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Comments (9)
Nils Hullmann
Nils Hullmann Jun 23, 2022 3:55PM ET
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inflation before war 7.5 now 8.6...he can lie all he wants..just makes him look even more incompetent
Casador Del Oso
Casador Del Oso Jun 23, 2022 1:37PM ET
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D'oh. Isn't that what rate hikes are supposed to do? Slow down the overheated economy.
Marco cuevas
Marco cuevas Jun 23, 2022 1:08PM ET
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Powell calls buddies "buy Puts I'm about to speak"
Jeff Chevalier
Jeff Chevalier Jun 23, 2022 1:08PM ET
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Funny thing. EVERYONE knew he was about to speak.
Chad Richer Than You
Chad Richer Than You Jun 23, 2022 6:56AM ET
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Who cares.. I make more money anyways!
sandeep varma
sandeep varma Jun 23, 2022 6:51AM ET
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Now fear is being spread in the name of recession ...this is the time when equity will rise again..
Jay Garrelts
Jay Garrelts Jun 22, 2022 11:12PM ET
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It’s OK everyone we’ve been negotiating with the aliens at the south pole they said we can drill there for all of your eternal souls I said Mr. you got a deal
Trevor Roberts
LimitUp Jun 22, 2022 11:12PM ET
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This kid probably lives in a massive house and his dad drives a different car every day.
Jay Garrelts
Jay Garrelts Jun 22, 2022 11:12PM ET
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Trevor Roberts well I’m old I got a massive ***and a my car well it’s a Ford lol
Dirk Peter van Dellen
Dirk_P Jun 22, 2022 11:12PM ET
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Jay Garrelts   Then it doesn't matter you're old ;)
Kerry Ditto
Kerry Ditto Jun 22, 2022 10:49PM ET
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oil prices belong to $20 ~ $30
Crypto Current
Crypto Current Jun 22, 2022 10:49PM ET
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hahahah, NO with this supply
Jake Might
Jake Might Jun 22, 2022 10:42PM ET
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it only means it was so overpriced
Kerry Ditto
Kerry Ditto Jun 22, 2022 10:39PM ET
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oil prices fall like rocks maybe as Ukraina peace hope mounts
Edward Chong
Edward Chong Jun 22, 2022 10:39PM ET
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its juz the big traders squeezing. next month u will see 120 again.
Dirk Peter van Dellen
Dirk_P Jun 22, 2022 10:39PM ET
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Ukraina peace hope mounts ?? That conflict will drag on imo, could last years.
 
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