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Oil falls on worries of U.S. rate hikes, China demand outlook

Commodities Nov 17, 2022 03:16PM ET
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© Reuters. FILE PHOTO: Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China August 22, 2019. REUTERS/Stringer
 
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By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices fell more than 3% on Thursday, with demand squeezed by mounting COVID-19 cases in China and fears of more aggressive hikes in U.S. interest rates.

Brent crude fell $3.08 to settle at $89.78 a barrel, down 3.3%. U.S. West Texas Intermediate (WTI) crude slid $3.95, or 4.6%, to settle at $81.64 per barrel.

"It's kind of a triple whammy. We've got COVID-19 cases rising in China, interest rates are continuing to rise here in the U.S. and now we've got technical weakness in the market," said Dennis Kissler, senior vice president of trading at BOK Financial.

St. Louis Federal Reserve President James Bullard said a basic monetary policy rule would require interest rates to rise to at least around 5%, while stricter assumptions would recommend rates above 7%.

The dollar also rose as investors digested U.S. economic data. A stronger dollar makes dollar-denominated oil more expensive for holders of other currencies.

China reported rising daily COVID-19 infections and Chinese refiners have asked to reduce Saudi crude volume in December, Reuters has reported, while also slowing Russian crude purchases.

While China's COVID case load is smaller than that of other countries, the world's largest crude importer maintains stringent policies to quash early outbreaks, dampening fuel demand.

On technical indicators, U.S. front-month futures fell below the 50-day simple moving average, triggering liquidation by funds, Kissler said, adding he expects the pressure to continue early next week.

"The market is really getting caught up for the potential of serious demand destruction, and we're definitely seeing the mood shift to the downside," said Phil Flynn, an analyst at Price Futures group.

Poland and NATO on Wednesday said a missile that crashed inside the country was probably a stray fired by Ukraine's air defences and not a Russian strike, easing fears the Russia-Ukraine war could widen.

"Thankfully, those fears have abated and the situation de-escalated, which has seen oil gains unwound," said Craig Erlam, senior market analyst at OANDA. "China remains a downside risk for oil in the near term."

Oil gained support from official figures showing U.S. crude stocks fell by a bigger than expected 5 million barrels in the latest week. [EIA/S]

Supply is also tightening in November as OPEC and its allies, known collectively as OPEC+, implement their latest output controls to support the market.

(Reporting Arathy Somasekhar in Houston and Alex Lawler in LondonAdditional reporting by Emily Chow and Jeslyn LerhEditing by Kirsten Donovan, Matthew Lewis and David Gregorio)

Oil falls on worries of U.S. rate hikes, China demand outlook
 

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Comments (3)
Jesse Doty
Jesse Doty Nov 18, 2022 11:11AM ET
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The relationship between Biden and China is frightening. China continues to manipulate the US in so many ways, COVID has driven inflation to the highest in 40= years, oil prices are up and down like a yo-yo to mention a couple of things.  Yet we are buying more and more wind and solar products from China, I believe folks should open their eyes to the real threat for the future of America. We seem to be headed to a China mix of Communist leadership and a capitalist economy, we are being told what to buy (EV cars) forced to buy China imports because of prices pushed to accept solar and wind for power which is heavily subsidized by our tax dollars The issues just keep growing and we are distracted by things that are really insignificant to the real problems.
Clay Douglass
Clay Douglass Nov 17, 2022 11:39AM ET
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Biden is a documented lying bum.
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First Last Nov 17, 2022 11:39AM ET
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Trump's record on lying ain't beat.
Brad Albright
Brad Albright Nov 17, 2022 11:39AM ET
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If by documented you mean living in the fevered hallucinations of those out of touch with reality, then yes.
Bill Powers
Bill Powers Nov 17, 2022 11:39AM ET
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Brad Albright https://www.washingtonpost.com/politics/2022/11/07/bottomless-pinocchio-biden-other-recent-gaffes/
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First Last Nov 17, 2022 11:39AM ET
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Bill Powers   But that's from Washington Post, and retrumplicans say WP is all fake news.
EL LA
EL LA Nov 17, 2022 9:12AM ET
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Biden should probably refill the SPR before OPEC+ cuts December production to balance the market as the strategic recession deepens. I doubt he wants an empty SPR before Dec 5
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First Last Nov 17, 2022 9:12AM ET
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Or Biden can wait for & cause Russia's invasion to fail when oil price will be even lower.
 
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