Crude oil post third weekly loss on fears of plans to boost US interest rates
Fears that the U.S Federal Reserve will accelerate plans to boost interest rates to tame inflation led to an oil price decline Friday, wiping out gains from the previous session.
As of Tuesday evening, Brent crude futures were trading at $82 per barrel, down 0.8%. West Texas Intermediate crude traded at $80.8 per barrel, down 1%.
In addition to a strengthening dollar, both benchmarks slumped for a third week in a row amid speculation that oil from the U.S. Strategic Petroleum Reserve can be released to temper prices. WTI declined 0.6%, while Brent declined 0.7%.
The week has served as a useful reminder for oil market participants that oil prices are not only affected by supply and demand, but also by monetary policy forecasts and government interventions. Higher interest rates would further support the dollar and put downward pressure on oil prices.
Jennifer Granholm, the U.S. Energy Secretary, said on Monday that Biden may act to combat rising gasoline prices this week.
This is the third week in a row that U.S. energy firms have added oil and gas drilling rigs. Baker Hughes said Friday that the oil and gas rig count, a leading indicator of future output, rose six to 556 in the week to Nov. 12.
As demand outstrips supply, Rosneft, the second-largest oil company in the world by output behind Saudi Aramco, warned on Friday of a possible “super cycle” in global energy markets.
Despite positive signs for demand, such as a rapid increase in air travel, tighter monetary and fiscal policy and a looming cold snap in the Northern Hemisphere will dampen things.
According to OPEC’s latest forecast, the world is forecast to use 330,000 fewer barrels per day in the fourth quarter than last month as high oil prices hamper economic recovery.
Oil markets are heading into a supply surplus, so OPEC and its allies should at least halt the loosening of their supply curbs in the new year. If nothing is done, global oil inventories will soar.
Last week, OPEC, Russia and its allies, collectively known as OPEC+, agreed to continue adding 400,000 barrels a day to the market each month.
