👀 Ones to watch: Undervalued stocks to buy before they report Q3 earningsSee Undervalued Stocks

Oil plunges 4% as interest rate hikes outweigh lower US oil supplies

Published 06/21/2023, 08:46 PM
Updated 06/22/2023, 02:56 PM
© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford/File Photo
EOG
-
LCO
-
CL
-
NYF
-

By Stephanie Kelly

NEW YORK (Reuters) -Oil futures fell about 4% on Thursday, as a bigger-than-expected Bank of England rate hike prompted worries about the economy and fuel demand that outweighed support from a surprise draw in U.S. oil supplies.

Brent futures settled down $2.98, or 3.9%, to $74.14 a barrel. U.S. West Texas Intermediate (WTI) crude futures were down $3.02, or 4.2%, at $69.51.

The benchmarks erased gains from the previous session, during which U.S. corn and soybean prices raced to multi-month highs, raising expectations that crop shortfalls could lower biofuels blending and increase oil demand.

The Bank of England raised interest rates by a bigger-than-expected half a percentage point to fight stubborn inflation. It was the central bank's 13th straight rate hike.

Higher interest rates could slow economic growth and reduce oil demand.

Feeding caution, U.S. Federal Reserve Chair Jerome Powell said two more rate hikes of 25 basis points each by the end of the year was "a pretty good guess."

"We're locked in a trading range but prices are held back by the concerns about the economy, the larger economy," said Phil Flynn, an analyst at Price Futures Group.

Equities, which often move in tandem with oil, were also down. [MKTS/GLOB]

In supply, U.S. crude inventories fell by 3.8 million barrels in the last week to 463.3 million barrels, compared with analysts' expectations in a Reuters poll for a 300,000-barrel rise.

U.S. gasoline stocks rose by about 480,000 barrels in the week to 221.4 million barrels, the Energy Information Administration (EIA) said, compared with analysts' expectations in a Reuters poll for a 100,000-barrel rise.​

Distillate stockpiles, which include diesel and heating oil, rose by about 430,000 barrels in the week to 114.3 million barrels, versus expectations for a 700,000-barrel rise, the EIA data showed.

"Given the decline in crude oil and the very modest increases in refined products inventories, I would have thought we would get a better response from the market, but the crude oil and refined product market is simply being weighed down by higher interest rates," said Andrew Lipow, president of Lipow Oil Associates in Houston.

© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford/File Photo

Investors are now awaiting Chinese factory activity data due next week, which could indicate the strength of China's economy.

An executive at U.S. shale producer EOG Resources (NYSE:EOG) said oil prices could rise as muted increases in U.S. oil production and cuts by OPEC+ producers will limit supply in the months ahead.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.