NEW YORK (BLOOMBERG, REUTERS) – Oil dropped as traders digested hawkish headlines from United States Federal Reserve officials ahead of chair Jerome Powell’s speech on Friday (Aug 26), exacerbating recessionary fears.
Brent crude settled at $99.34 a barrel, shedding US$1.88, or 1.9 per cent. US West Texas Intermediate crude settled at US$92.52 a barrel, losing US$2.37, or 2.5 per cent.
Following a choppy start, the market drifted lower as Fed officials dropped hawkish hints on economic policy ahead of the central bank’s Jackson Hole symposium. Rate hikes are typically seen as bearish for crude demand as they are aimed at cooling off the economy.
“Oil is entering wait-and-see mode until Fed chair Powell’s speech at Jackson Hole,” said Oanda senior market analyst Ed Moya. “Everyone is anticipating a big move in the dollar post-Powell and that will likely determine if we see oil prices continue to make a move towards the US$100-a-barrel level.”
Meanwhile, prices continue to find support in multiple signs of a tight market. Earlier in the week, US inventories dropped for a second week in a row as the country exported its highest-ever volume of crude and refined products.
Saudi Arabia also suggested that Opec+ could intervene by curbing output if market fundamentals and futures markets continue to diverge. Members of the Organisation of Petroleum Exporting Countries and its allies have lined up to support the Saudi suggestion for market intervention, while export problems in Kazakhstan have kept supply concerns at the forefront.
The developments have bolstered trading activity, with benchmark international futures volumes topping one million contracts for the first time since the middle of July.
After surging during the first five months of the year, crude has been in retreat, with losses deepening in the summer trading months. The sell-off, which has been intensified by below-average trading volumes, may alleviate some of the inflationary pressures coursing through the global economy.
Iran will seek to fill the void left by Russia in Europe, and try to win back customers in countries including Greece, Italy, Spain and Turkey if a nuclear deal is secured, according to people familiar with the matter.
Moscow has also approached several Asian countries to discuss possible long-term oil contracts at steep discounts as US officials continue to push a price cap plan.
source https://netdace.com/latest-news/oil-prices-sink-2-a-barrel-as-markets-digest-hawkish-interest-rate-hike-cues/