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Oil falls around 3% as investors eye U.S. Fed rate hikes

Commodities Jun 22, 2022 04:56PM ET
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© Reuters. FILE PHOTO: A 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. Picture taken November 22, 2019. REUTERS/Angus Mordant/

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices tumbled around 3% on Wednesday as investors worried that rate hikes by the Federal Reserve could push the U.S. economy into recession, dampening demand for fuel.

Brent crude futures fell $2.91, or 2.5%, to settle at $111.74 a barrel. The global benchmark hit a session low of $107.03, its lowest since May 19.

U.S. West Texas Intermediate (WTI) fell $3.33, or 3%, to settle at $106.19 a barrel. The session low was $101.53, its lowest since May 11.

Investors assessed on Wednesday how interest rate hikes designed to cool soaring inflation might stall an economic recovery. [MKTS/GLOB]

Oil prices pared losses, however, during the session after Fed Chair Jerome Powell pledged an "overarching focus" on bringing down inflation and reiterated that ongoing increases in the central bank's policy rate would be appropriate, with the pace depending on the economic outlook.

"Powell seemed to change the mood of the market by seeming confident about the U.S. economy," said Phil Flynn, analyst at Price Futures. "His words have soothed the market and put a bottom on prices for the short-term."

Meanwhile, U.S. President Joe Biden called on Congress to pass a three-month suspension of the federal gasoline tax to help combat record pump prices and provide temporary relief for American families this summer.

While lower pump prices could actually boost demand for fuel and support crude prices, PVM analyst Stephen Brennock said traders could be worried the Biden administration might take further measures to cool high energy prices.

Lawmakers of both major parties have expressed resistance to suspending the federal gasoline tax.

The White House asked the chief executives of seven oil companies to a meeting on Thursday to discuss ways to increase production capacity and reduce gasoline prices of around $5 a gallon.

Biden has publicly criticized Big Oil for banking big profits but he has rarely spoken directly to the heads of energy companies or their representatives, White House records and interviews with industry sources show.

Chevron (NYSE:CVX) CEO Michael Wirth said criticizing the oil industry was not the way to bring down fuel prices and the government should change its approach. Biden replied he was unaware oil executives could "get their feelings hurt that easily."

U.S. oil refining capacity fell in 2021 for the second year in a row, government data showed, as plant shutdowns kept whittling away on their ability to produce gasoline and diesel.

U.S. crude stocks rose by about 5.6 million barrels last week, gasoline inventories increased by 1.2 million barrels, while distillate stocks fell by about 1.7 million barrels, according to market sources citing American Petroleum Institute figures on Wednesday. [API/S] [EIA/S]

The U.S. Energy Information Administration said its weekly oil data, which was scheduled for release on Thursday, will be delayed due to systems issues at least until next week. It was unclear when the EIA will publish the report.

The $2.4 trillion set to be invested globally in energy this year includes record spending on renewables but falls short of plugging a supply gap and tackling climate change, the International Energy Agency said.

Oil falls around 3% as investors eye U.S. Fed rate hikes
 

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Comments (27)
Dave Jones
Dave Jones Jun 22, 2022 2:22PM ET
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with all the free money Wall Street gets they spend on buybacks and dividends instead of new factories or infrastructure. They are now Addicted to free money.
Green Mango
Green Mango Jun 22, 2022 11:29AM ET
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I previously believed that that Dems in control of economic policy was like having a slow child at the helm. No I know it is more like a demonic psychopath driving the ship.
Tre Hsi
Tre Hsi Jun 22, 2022 11:29AM ET
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is that why stock markets tripled under both Bill Clinton and Barak Obama?
Dave Jones
Dave Jones Jun 22, 2022 11:29AM ET
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probably. both psychopaths.
Cory Larson
Cory Larson Jun 22, 2022 11:29AM ET
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they tripled via luck, not policy. one was tech and the other the disaster we can't eliminate called Obama care. funny that nobody bitches nor calls for anti trust laws against the tech firm giants from the Clinton era nor the massive healthcare profits of Obama.both are multi millionaires after serving by the way.don't give me your shit retort as defense against this worthless administration.at least the former you described had the common sense to implement policy that helped. I don't care where you stand on environmental issues, this administration failed to understand the macro effect of poor policy.in other words, Biden is moronic and his advisors at the helm are equally incompetent.solving problems is one thing. creating problems at the tail end of a pandemic is unforgivable.sorry bud.... you're wrong!
Brad Albright
Brad Albright Jun 22, 2022 11:29AM ET
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Cory Larson How did you get the night shift, comrade? Is it because of your ignorance of American history? Let me help you. The economy of the Clinton era was fueled by start-ups and new tech brought about by the anit-trust breakup of AT&T. You are welcome to your own artery-hardening rage, but not your own facts.
So Shrugged Atlas
SoShruggedAtlas Jun 22, 2022 10:24AM ET
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This admin wants more gasoline but is choking lng, so potentially lower gas prices will be offset by even higher electricity prices. Demand for oil is still going higher through 2040 projections. Biden is a scare ostrich with his head in the sand.
Green Mango
Green Mango Jun 22, 2022 10:24AM ET
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In ten tion al
Amit Vishwakarma
Amit Vishwakarma Jun 22, 2022 10:21AM ET
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advice market up or down ???
Evan The Man
Evan The Man Jun 22, 2022 10:07AM ET
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Thank you Russian trollsl for Putin's views on this.
David CA
ILoveQE Jun 22, 2022 10:01AM ET
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The basement dummy is going to royally *******this up.
znao sam
znao sam Jun 22, 2022 9:53AM ET
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and that mean they will be more driving....This administration is a joke
Cornel Pod
Cornel Pod Jun 22, 2022 9:30AM ET
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The only way short term for oil prices to come down is MORE SUPPLY. Shows you how lost, confused and optically sensitive to reelection these politicians are. Don't eat your fries at all at once bought from these savings.
albert wardhana
albert wardhana Jun 22, 2022 9:00AM ET
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need Trump back in driving seat asap
Tre Hsi
Tre Hsi Jun 22, 2022 9:00AM ET
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was he ever in the driver's seat?
Brad Albright
Brad Albright Jun 22, 2022 9:00AM ET
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Pay attention. Trump is a criminal and is going to jail.
john smith
john smith Jun 22, 2022 9:00AM ET
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I've been hearing this for quite awhile. Every supposed "trump scandal" turns out to be a bogus projection. Mid terms will be a slaughter house.
Brad Albright
Brad Albright Jun 22, 2022 9:00AM ET
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john smith What did you think of the testimony from Republican officials before the 1/6 committee about Trump's fraudulent elector scheme?
deez nutzz
deez nutzz Jun 22, 2022 9:00AM ET
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you are a brainwashed POS. I hope Hillary Clinton pegs you in all holes. u would love it
Scott Freebairn
Scott Freebairn Jun 22, 2022 6:22AM ET
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Dear Uncle Joe, Reverse all of your executive orders that caused this debacle in the first place.  You caused this problem, eliminating gas tax will do nothing to fix the actual problem.  That will only mask the real issue (your war on oil) for 3 months until the mid-term elections are over.  We are not as stupid as you think we are.  You have no intention of creating a commonsense reduction in our reliance on oil, and your policies to encourage the production of more electric vehicles will do more to overtax our electrical grid with more rolling brownouts and blackouts.  No real planning here. Eliminating the Democrats majority in both houses of Congress and removing you from office in 2024 is the real cure.  It's shocking how quickly you turned our country into complete chaos.
Amy Carbob
Amy Carbob Jun 22, 2022 6:22AM ET
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Taxation is theft . He absolutely should repeal the gas tax and every state should repeal theirs as well
Brad Albright
Brad Albright Jun 22, 2022 6:22AM ET
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The midterm election are in November. So, yes, you are as stupid as we think you are.
Philip Bolin
Philip Bolin Jun 22, 2022 6:22AM ET
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Tre Hsi
Tre Hsi Jun 22, 2022 6:22AM ET
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"Reverse all of your executive orders that caused this debacle in the first place."  -- oh do tell us which executive orders caused the oil price to go up to $100/barrel?
Brad Albright
Brad Albright Jun 22, 2022 6:22AM ET
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Tre Hsi Please, let's not bring facts into this.
 
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