Oil Under Pressure As Fed Comments Signal Continued Rate Hikes
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(Bloomberg) -- Oil fell as weekend comments from a Federal Reserve speaker reignited uncertainty about future rate hikes, pressuring market sentiment and boosting the dollar.
West Texas Intermediate futures traded near $87 a barrel, falling a leg further as markets mulled weekend comments from Fed Governor Christopher Waller that policymakers had “a ways to go” before ending interest-rate hikes. A rising dollar makes commodities priced in the currency more expensive, overshadowing expectations for rising Chinese demand after the nation toned down some of its strict Covid Zero restrictions.
Traders balanced broader market fears with ongoing risks to supply, which kept futures locked in a tight range. An increase in Chinese crude consumption could lead to further tightening of the market, which is facing European Union sanctions on Russian oil flows next month. OPEC cut its forecasts for global oil demand on Monday, which some analysts said could signal further production cuts ahead.
“The Covid-19 situation in China is cutting both ways in that right now obviously there’s a big increase in cases weighing things down but it looks like they are finally preparing to pivot,” said John Kilduff, founding partner at Again Capital. “That’s something of a game changer and the oil market’s been highly reactive to any hope or optimism about the reopening.”
US Treasury Secretary Janet Yellen said Russia will likely have to shut in some of its oil production if it doesn’t abide by a price cap. The European Union is “ready to go” with an effort to impose a price cap on Russian oil, according to the president of the group’s executive arm, Ursula von der Leyen, though a price level has not yet been decided.
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