Oils slips as dollar reaches 24-year high on inflation worries
Brent crude futures fell 46c, while WTI crude was down 54c as China tightens Covid-19 curbs
12 October 2022 - 07:38
byReuters
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Oil prices slipped for a third straight session on Wednesday as the dollar gained steam and investors braced for US inflation data, while global recession risks and tightening Covid-19 curbs in China triggered worries about fuel demand.
Brent crude futures fell 46c, or 0.5%, to $93.83 a barrel by 4.10am GMT. US West Texas Intermediate (WTI) crude was at $88.81 a barrel, down 54c, or 0.6%.
Both benchmarks fell 2% in the previous session.
The greenback rose to a fresh 24-year high against the yen on Wednesday on concerns about inflation and the pace of US rate hikes. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies and tends to weigh on oil and other risk assets.
“Despite fundamentals auguring higher for oil and a rather hefty production cut [by Opec], any breakdown in risk assets may continue to hurt oil prices until some semblance of bottom forms in risk assets,” Stephen Innes, managing partner at SPI Asset Management, said in a note.
“So, a hot CPI and even a dreary US earning season could negatively impact oil markets,” Innes added.
The US consumer price report is due on Thursday.
The International Monetary Fund (IMF) on Tuesday cut its global growth forecast for 2023 and warned of increasing risk of a global recession.
But the IMF also urged central banks to keep up their fight against inflation even as investors worry policymakers could trigger a sharp economic downturn by raising borrowing costs too fast and too high.
The oil market is also being pressured by tightening Covid-19 curbs in China, the world’s second-largest oil consumer.
Big Chinese cities, including Shanghai and Shenzhen, have ramped up Covid-19 testing and tightened restrictions after infections rose to their highest since August.
“Chinese authorities are indicating that there will not be any relaxation in their Covid-19 policy, further worsening the demand situation,” ANZ Research analysts said in a note.
On the supply side, US crude oil stocks were estimated to have risen by 1.8-million barrels in the week to October 7, after having fallen the prior two weeks, a preliminary Reuters poll showed on Tuesday.
Inventories data has been delayed by a day this week, because of a holiday on Monday. Industry data from the American Petroleum Institute (API) is due at 4:30pm EDT (8.30pm GMT) on Wednesday, while the US Energy Information Administration (EIA) will release its data at 11am EDT (3.00pm GMT) on Thursday.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oils slips as dollar reaches 24-year high on inflation worries
Brent crude futures fell 46c, while WTI crude was down 54c as China tightens Covid-19 curbs
Oil prices slipped for a third straight session on Wednesday as the dollar gained steam and investors braced for US inflation data, while global recession risks and tightening Covid-19 curbs in China triggered worries about fuel demand.
Brent crude futures fell 46c, or 0.5%, to $93.83 a barrel by 4.10am GMT. US West Texas Intermediate (WTI) crude was at $88.81 a barrel, down 54c, or 0.6%.
Both benchmarks fell 2% in the previous session.
The greenback rose to a fresh 24-year high against the yen on Wednesday on concerns about inflation and the pace of US rate hikes. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies and tends to weigh on oil and other risk assets.
“Despite fundamentals auguring higher for oil and a rather hefty production cut [by Opec], any breakdown in risk assets may continue to hurt oil prices until some semblance of bottom forms in risk assets,” Stephen Innes, managing partner at SPI Asset Management, said in a note.
“So, a hot CPI and even a dreary US earning season could negatively impact oil markets,” Innes added.
The US consumer price report is due on Thursday.
The International Monetary Fund (IMF) on Tuesday cut its global growth forecast for 2023 and warned of increasing risk of a global recession.
But the IMF also urged central banks to keep up their fight against inflation even as investors worry policymakers could trigger a sharp economic downturn by raising borrowing costs too fast and too high.
The oil market is also being pressured by tightening Covid-19 curbs in China, the world’s second-largest oil consumer.
Big Chinese cities, including Shanghai and Shenzhen, have ramped up Covid-19 testing and tightened restrictions after infections rose to their highest since August.
“Chinese authorities are indicating that there will not be any relaxation in their Covid-19 policy, further worsening the demand situation,” ANZ Research analysts said in a note.
On the supply side, US crude oil stocks were estimated to have risen by 1.8-million barrels in the week to October 7, after having fallen the prior two weeks, a preliminary Reuters poll showed on Tuesday.
Inventories data has been delayed by a day this week, because of a holiday on Monday. Industry data from the American Petroleum Institute (API) is due at 4:30pm EDT (8.30pm GMT) on Wednesday, while the US Energy Information Administration (EIA) will release its data at 11am EDT (3.00pm GMT) on Thursday.
Reuters
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