Oil prices slid about 1% to a two-week low on Thursday on increased worries the U.S. Federal Reserve may go too far with its interest rate hikes to control inflation, which could cause a recession and reduce future oil demand. The U.S. central bank uses higher interest rates to reduce inflation. But those higher rates increase consumer borrowing costs, which can slow the economy. “The Fed is continuing to come … for inflation and that is translating into fears over lower oil demand down the road because of a possible recession,” said John Kilduff, a partner at investment advisory Again Capital LLC in New York. Brent futures fell $1.07, or 1.3%, to settle at $81.59 a barrel, their lowest close since Feb. 22. U.S. West Texas Intermediate (WTI) crude fell 94 cents, or 1.2%, to settle at $75.72, their lowest close since Feb. 27. That put both benchmarks down for a third day in a row with WTI down about 6% and Brent down about 5% during that time. The number of Americans filing new claims for unemployment benefitsincreased by the most in five months last week, but the underlying trend remained consistent with a tight labor market. “Decelerating growth continues to weigh on crude prices,” said Edward Moya, senior market analyst at data and analytics firm OANDA. Renewed hawkishness from the Fed is pushing investors to game out how a regime of ‘higher for longer’ interest rates could weigh on U.S. stocks with some market watchers saying the combination of higher bond yields and sticky inflation bodes poorly for equity returns. Kilduff noted that the U.S. bond auction Thursday afternoon “spooked the market” and “was the catalyst for the risk off sentiment” for the oil and stock market declines
Source: National News Agency – Lebanon