Oil Drops From Four-Week High on Hawkish Interest Rate Outlook

Elizabeth Low and Alex LongleyThu, June 22, 2023, 8:57 AM EDTIn this article: 

(Bloomberg) — Brent oil fell from its highest close in four weeks as a raft of hawkish views on interest rates hurt risk sentiment.

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The global benchmark dropped 2.1% to trade below $76 a barrel, after settling at the highest since May 24 on Wednesday. Federal Reserve Chair Jerome Powell, who will deliver additional remarks on Thursday, warned yesterday that further rate hikes were likely warranted to quell inflation. Broader markets were pressured Thursday as Powell’s comments were followed by the Bank of England raising rates more than expected and Norway also hiking.

Adding further pressure was a failure to hold above Brent’s 50-day moving average, a key technical level, which it pierced on Wednesday for the first time since late April.

Official prints on US crude stockpiles are due later after holdings at the key hub in Cushing, Oklahoma, hit a two-year high last week. Ahead of that, people familiar with data from the industry-funded American Petroleum Institute said its outlook pointed to a drop nationwide, but a small rise at Cushing.

Prices have been largely rangebound since early May as pressure from higher interest rates and robust supplies vie with efforts by OPEC+ to support crude. Traders are now keenly focused on the outlook for the second half of the year, which could be tight even with sluggish Chinese growth, according to the International Energy Agency.

“Oil prices are trading in the high end of the range over the month,” said Jens Pedersen, senior analyst at Danske Bank AS. “Big interest rate decisions in Europe are setting the tone for risk sentiment and the oil market today.”

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