Oil prices fall on fears of rising interest rates

Introduction:

Oil prices have fallen for the third consecutive day as fears of rising interest rates outweighed a surprise drop in US crude inventories and hopes of Chinese demand. The recent comments by the US Federal Reserve Chair Jerome Powell regarding the need for more rate hikes due to strong data have continued to impact the oil market, causing a decline in demand growth. Despite the surprise drop in US crude inventories, oil prices fell between 4% and 5% over the past two days. However, there is still some support for oil prices from the expectation of rising Chinese demand.

Fears of rising interest rates affecting oil prices

The recent comments made by the US Federal Reserve Chair Jerome Powell, stating that interest rates would need to be raised more than previously expected, have led to fears of an economic slowdown and a decline in demand for oil. Powell’s hawkish tone has continued to affect the oil market, causing prices to fall for the third day in a row. The possibility of a 50 basis points rate hike instead of a 25 basis points hike has led to further concerns about the economic impact on oil prices.

Surprise drop in US crude inventories

Despite the fall in oil prices, there was some support for the market from the official figures on US crude inventories. The inventories fell by 1.7 million barrels last week, ending a ten-week run of increases. The drop was a surprise, as the Reuters poll had predicted an increase of 400,000 barrels. This unexpected decline in inventories may support oil prices in the short term, as it suggests that demand for crude oil in the US may be stronger than expected.

Rising Chinese demand

Although Chinese crude oil imports fell by 1.3% year on year in the first two months of 2023, there is still hope for the oil market as imports have accelerated in February. This is seen as a sign that fuel demand is rebounding after Beijing scrapped COVID-19 controls. The expectation of rising Chinese demand is another factor that may support oil prices in the near future.

Conclusion

In conclusion, oil prices have fallen for the third day in a row due to fears of rising interest rates, which may impact economic and demand growth. However, the surprise drop in US crude inventories and the expectation of rising Chinese demand provide some support for the oil market. It remains to be seen how oil prices will perform in the coming weeks, as the market continues to be affected by a range of factors.