Oil Prices Dip on Rate Hike Concerns, Reducing Fuel Demand

Oil prices dropped slightly in early Asian trading on Thursday, as investors took profits amid concerns that additional interest rate increases by central banks could slow economic growth and global demand for energy.

Brent crude futures fell 40 cents, or 0.54%, to $73.63 a barrel by 10.48 A.M. Bangkok time. U.S. West Texas Intermediate (WTI) crude futures lost 36 cents, or 0.56%, to $69.17 a barrel.

On Wednesday, both benchmarks gained over 3% after the U.S. Energy Information Administration (EIA) reported a 9.6 million barrel reduction in crude stockpiles for the week ending June 23, compared to a 1.8 million barrel loss predicted in a Reuters poll.

However, Federal Reserve Chair Jerome Powell’s suggestion that interest rates could rise higher this year left investors on edge. The dollar gained ground after he spoke.

A rally in the oil market was also limited by the reaffirmation by the leaders of the global major central banks that more policy tightening will be required in bid to rein in stubbornly high inflation, but that they still believe they can do so without causing recessions.

The focus will be on a meeting of the Organization of Petroleum Exporting Countries next week, which follows a succession of unexpected production cuts by the cartel to support oil prices this year.