2023-09-26 04:12:59
Oil prices fell Tuesday amid concerns that fuel demand will be dampened by major central banks keeping interest rates high for longer while supply is expected to be restricted.
Brent oil futures were down 38 cents at $92.91 a barrel by 0400 GMT, while West Texas Intermediate oil futures were trading 34 cents lower at $89.34.
“Fears of an economic recession might once once more dominate oil market movements due to rising U.S. bond yields following the Fed’s hawkish stance last week,” said Tina Teng, market analyst at CMC Markets in Auckland.
The main makers of global economic policy, the US Federal Reserve and the European Central Bank, have in recent days reiterated their commitment to fighting inflation, indicating that the austerity policy might last longer than expected. Higher interest rates slow economic growth, which dampens demand for oil.
Separately, ratings agency Moody’s said Monday that a U.S. government shutdown would harm the country’s creditworthiness, a month following ratings agency Fitch downgraded the United States by one notch due to of the debt ceiling crisis.
China’s real estate woes also weighed on sentiment, CMC’s Mr. Teng added, with China Evergrande’s announcement late Monday that it had not paid a bond coupon reigniting investor pessimism. towards the sector.
While supply remains tight, with Russia and Saudi Arabia having extended their production cuts until the end of the year, Moscow on Monday eased its temporary ban on gasoline and diesel exports, decreed separately to stabilize the internal market.
With China’s Golden Week holiday starting on Sunday, oil prices might be supported by the resumption of travel and resulting demand for petroleum products from the world’s second-largest oil consumer.
According to JP Morgan, oil prices have risen regarding 30% since mid-year, mainly due to tighter supply, which has reduced global GDP growth by 0.5 percentage points in the past year. during the second half of this year.
But the shock “is not large enough to threaten the expansion per se,” JP Morgan added in a note.
“We forecast $94 a barrel through Q4 ’23, which is the maximum slope of the curve we see before OPEC likely eases its supply constraints,” said Baden Moore, head of the carbon and raw materials strategy at the National Australia Bank. (Reporting by Katya Golubkova in Tokyo and Andrew Hayley in Beijing; Editing by Sonali Paul)
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