Oil prices fell by nearly $2 a barrel on Thursday (June 23) after new comments from Federal Reserve Chairman Jerome Powell raised concerns that a hike in US interest rates would increase economic growth decelerate.
Ending Thursday’s session, the Brent oil contract dropped $1.69 (or 1.5%) to $110.05 per barrel. WTI oil contract lost 1.92 USD (equivalent to 1.8%) to 104.27 USD/barrel.
Mr. Powell said the Fed’s focus on containing inflation was “unconditionally” and the labor market was unsustainably strong, comments that have raised concerns about higher interest rates.
Investors are weighing positions on risk assets as they assess whether central banks’ response to inflation could tip the world economy into a recession with high interest rates.
Additionally, Robert Yawger, director of energy futures contracts at Mizuho, thinks high gasoline prices could start to dampen demand.
According to sources familiar with the matter, major US oil refiners and US Energy Secretary Jennifer Granholm emerged from an emergency meeting about the issue of no concrete solution to lower oil prices, however, the two sides have agreed to work together to solve the problem.
The most recent estimates from the American Petroleum Institute (API) showed that crude oil and gasoline inventories in the United States increased last week, also putting pressure on oil prices.
The Organization of the Petroleum Exporting Countries (OPEC) and allied producing nations including Russia are likely to stick to plans to raise output in August in hopes of easing crude prices and inflation, as the President US Joe Biden plans to visit Saudi Arabia.
The OPEC+ group agreed at the last meeting on June 2 to increase production by 648,000 bpd in July, equivalent to 7% of global demand, and add the same amount in August, up from The original plan was to add 432,000 bpd over 3 months until September 2022.