Oil prices fall before a possible big US interest rate hike

Pumping cranes pump oil into an oil field on the shores of the Caspian Sea in Baku, Azerbaijan, October 5, 2017. REUTERS/Gregory Ducor

NEW YORK (Reuters) – Oil prices fell on Thursday, paring some losses after falling more than $4, as investors focused on the prospect of a US interest rate hike later this month that could stem inflation but at the same time weigh on oil. the demand.

Brent crude futures for September were down $1.18, or 1.2 percent, at $98.39 a barrel by 1:50 p.m. ET (1750 GMT) and were on track to end a third straight session below $100.

The price of US West Texas Intermediate crude for August delivery was $95.02 a barrel, or down 1.3%, down $1.28.

Both contracts hit their lowest levels on Thursday and were below the Feb. 23 close, the day before Russia invaded Ukraine, with Brent crude reaching its lowest level since Feb. 21.

The US Federal Reserve is seen stepping up its battle with 40-year inflation with a 100bp rate hike this month after a grim inflation report showed price pressures accelerating. The Fed policy meeting is scheduled for July 26-27.

A rate hike by the Federal Reserve is expected to be followed by a similar move by the Bank of Canada which surprised the market on Wednesday.

“The Fed’s moves will have a significant impact on the market as we watch it try to digest new economic data on inflation,” said John Kilduff, partner at Again Capital in New York.

Oil prices have fallen in the past two weeks on fears of a recession despite a decline in crude and refined products exports from Russia amid Western sanctions and supply disruptions in Libya. Read more

Investors also flocked to the dollar, which is often seen as a safe asset. The dollar index hit a 20-year high on Wednesday, making oil more expensive to buy for non-US buyers.

Tamas Varga, an analyst at PVM Oil Associates, said.

In Europe, signs were also bearish for demand as the European Commission cut its economic growth forecast and raised the expected inflation rate to 7.6%. Read more

Concerns about COVID-19 restrictions in many Chinese cities to curb new cases of the highly contagious variant have also curbed oil prices.

Customs data showed, on Wednesday, that China’s daily imports of crude oil fell in June to the lowest level since July 2018, as refineries expected closing measures to curb demand.

US Energy Information Administration data also indicates slowing demand, with the supply of products falling to 18.7 million barrels per day, the lowest level since June 2021. Crude stocks rose, supported by another large release of strategic reserves. Read more

On Friday, US President Joe Biden heads to Saudi Arabia, where he will attend a summit of Gulf allies and invite them to pump more oil.

However, spare capacity in the Organization of the Petroleum Exporting Countries is declining, with most producers pumping at full capacity, and it is unclear how much more Saudi Arabia can bring to market quickly. Read more

Reporting by Laura Sanicola in New York Additional reporting by Julia Payne in London and Florence Tan in Singapore Editing by Jason Neely and Matthew Lewis

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