Oil fell the most in three months as US Federal Reserve Chair Jerome Powell doubled down on his determination to curb the hottest inflation in decades with more aggressive rate hikes.
West Texas Intermediate for July delivery dropped 6.83 percent to US$109.56 a barrel, its biggest daily drop since March. It plunged 9.2 percent from a week earlier.
Brent crude for August delivery dropped 5.58 percent to US$113.12 a barrel, posting a weekly decline of 7.29 percent.
Photo: Reuters
Powell this week for the first time openly endorsed raising interest rates well into restrictive territory, a strategy that has often resulted in an economic downturn and could blunt energy consumption.
On Friday, he reiterated that the Fed is focused on returning inflation to its 2 percent target.
“All the headlines seem to have turned bearish for oil, and that could see further technical selling target the psychological US$100 a barrel level,” Oanda Corp senior market analyst Edward Moya said.
“Once this move lower is complete, oil should stabilize and trade comfortably above the US$100 a barrel level as potential disruptions from either further sanctions on Russia oil or hurricane season will keep supplies at dangerously low levels,” he said.
Fears that rising interest rates and a slowdown in economic growth will lead to demand destruction have gripped the market, but in the long run, supplies still look tight, market participants said.
“I don’t think the sell-off will continue as we have major supply shortfalls such as in non-OPEC non-US production and OPEC spare capacity; fundamentals for energy remain bullish and we recommend buying the dips,” JPMorgan global head of energy strategy Christyan Malek said.
Russia’s invasion of Ukraine has compounded global price increases and helped to drive up the cost of everything from food to fuels. US retail gasoline prices have repeatedly broken records and the national average recently topped US$5 a gallon. The White House is weighing limits on fuel exports to try to alleviate the pain at the pump.
Crude is still up more than 50 percent this year.
Additional reporting by staff writer
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