Oil Prices Decline Slightly on Rate Hike Shock, Erasing Weekly Gains

Oil prices steadied slightly in early Asian trade on Friday, recouping some of the ground lost earlier in the trading session as worries about increasing interest rates and worsening economic prospects drove investors running for the exits.

By 10:41 a.m. Bank time, Brent oil futures fell to $73.65 per barrel, while West Texas Intermediate crude futures dropped to $69.00 per barrel. Both contracts lost by almost 4% overnight after the Bank of England raised rates by a wider margin than predicted and after Federal Reserve Chair Jerome Powell reaffirmed the Fed’s plan for more rate hikes.

Powell’s comments, coupled with the Bank of England’s unexpected decision, fueled concerns that the global economy would worsen in the face of rising interest rates, which will decrease oil demand this year. 

The markets broadly anticipate a rate hike of at least 25 basis points from the Fed in July. 

Stronger-than-anticipated Japanese inflation statistics, with a key index hitting a 42-year high, also contributed to rising inflation fears.