Oil Steadies After Rate Hike Concerns Spur Sell-Off
LONDON—Oil prices steadied after earlier losses on Wednesday, driven by fears that more aggressive U.S. interest rate hikes would hit demand, while the market awaited further clarity on inventories.
Brent crude futures climbed 11 cents, or 0.1 percent, to $83.40 per barrel by 1103 GMT. U.S. West Texas Intermediate (WTI) crude futures eased 9 cents, or 0.1 percent, to $77.49 a barrel.
Both Brent and WTI fell by more than 3 percent on Tuesday after comments by U.S. Federal Reserve Chair Jerome Powell that the central bank would likely need to raise interest rates more than expected in response to recent strong data.
“Fed Chair Powell’s comments on ‘higher for longer’ rates spooked markets and sent risk assets, including commodities, sharply down overnight,” said Tina Teng, an analyst at CMC Markets.
A stronger dollar also capped a lid on oil prices. Powell’s comments had propelled the U.S. dollar, which typically trades inversely with oil, to hit a three-month high against a basket of currencies.
Barclays lowered its 2023 Brent forecast by $6 to $92 a barrel and WTI by $7 to $87, “due primarily to more resilient-than-expected Russian supplies,” the bank said.
“[We] expect the continued recovery in civil aviation demand in China and neighboring countries, a stabilisation in industrial activity, and slower non-OPEC+ supply growth to drive the oil market balance into a deficit later this year,” the bank added.
Traders were also awaiting crude inventory data from the U.S. Energy Information Administration later on Wednesday, after the API data showed a decline in crude inventories for the first time after a 10-week build, she said.
