As market participants bracing for another hawkish rates hike from U.S. Federal Reserve, oil prices extended previous day’s losses and slipped on Wednesday as they chip in the further slowing-down of the economy and declining demand for oil.
Brent crude futures dropped 0.3% to $90.36 a barrel (at the time of writing) after falling $1.38 the previous day.
Meanwhile, U.S. West Texas Intermediate crude was at $83.74 a barrel, down 20 cents, or 0.2%. The October delivery contract expired down $1.28 on Tuesday while the more active November contract lost $1.42.
The market sentiment remained bearish due to worries that the aggressive monetary tightening in the U.S. and Europe would boost the likelihood of a recession and a slump in fuel demand, according to analysts.
Due to the earlier statement by the Federal Reserve’s Chair, hence the Fed is expected to hike rates by 75 basis points for the third time in a row to rein in inflation. Whilst, other major central banks meet this week as well.
The US dollar has appreciated against other currencies due to higher rates. The greenback is almost at a two-decade high on Tuesday.
According to American Petroleum Institute figures on Tuesday, U.S. crude and fuel stocks rose by about 1 million barrels for the week ended Sept. 16, gasoline inventories rose by about 3.2 million barrels, while distillate stocks rose by about 1.5 million barrels.
On the supply side, the OPEC+ producer grouping is now falling a record 3.58 million barrels per day short of its targets, or about 3.5% of global demand. The shortfall highlights underlying tightness of supply in the market, even as recession fears drag prices lower.