Oil futures traded lower Thursday as global central banks followed the Federal Reserve in delivering interest rate hikes to combat inflation, raising worries over economic growth prospects and crude demand despite tight supplies.
Price action
- West Texas Intermediate crude for July delivery CL.1, -1.56% CL00, -1.56% CLN22, -1.56% fell $2.11, or 1.8%, to $113.20 a barrel on the New York Mercantile Exchange.
- August Brent crude BRN00, -1.53% BRNQ22, -1.53%, the global benchmark, fell $2.24, or 1.9%, to $116.27 a barrel on ICE Futures Europe.
- Back on Nymex, July gasoline RBN22, -1.44% fell 1.6% to $3.8316 a gallon, while July heating oil HON22, -2.44% dropped 2.3% to $4.444 a gallon.
- July natural gas NGN22, +5.09% jumped 5.4% to $7.811 per million British thermal units.
Market drivers
Oil was falling in concert with equities and other assets perceived as risky on Thursday. Crude ended at a two-week low Wednesday after the Federal Reserve delivered a 75 basis point interest rate hike, though equities initially bounced after the decision. U.S. stocks were headed for a sharply lower open on Thursday though as other central banks also tightened monetary policy.
Read: As Fed aggressively raises rates, here are 4 takeaways from Jerome Powell’s press conference
The Swiss National Bank lifted its base rate by a half point, to negative 0.25%, while the Bank of England delivered a quarter-point hike on Thursday.
“Oil barrels are coming with a warning label today: ‘Fed induced demand destruction is on its way,’” wrote Stephen Innes, managing partner at SPI Asset Management, in emailed comments.
“Oil prices continue to struggle to break intraday higher ground now that oil prices are pinging louder on the Fed’s new inflation radar. With the pivot from core to headline as the primary gauge, higher oil prices raise the spectre that the Feds will be content to continue raising rates to eliminate sticky energy inflation, even if that means higher unemployment,” he said.