On Monday, oil prices plummeted amid the market’s concerns over the economic impact of the Fed’s possible interest rate hike. It is coupled with weaker Chinese manufacturing data that was outweighed supported by the OPEC+ supply cut.
At the time of writing, the US West Texas Intermediate futures shrank by 2.02% to $75.23 per barrel. Likewise, the international benchmark Brent contracts also declined by 1.89% to $78.81 a barrel.
On May 02 to 02, the Federal Reserve policymakers will meet and are expected to hike the interest rate by another 25 basis points. Due to this, the US dollar index spiked against a basket of currencies, making oil more expensive for holders of other currencies.
At the same time, the Reserve Bank of Australia is anticipated to extend a rate hike pause on Tuesday. Besides, the European Central Bank is projected to make an outsized half-point increase on Thursday.
In China, the manufacturing purchasing managers’ index (PMI) fell to 49.20 from 51.90. It slipped below the 50-point level that separates expansion and contraction in activity month-over-month. Hence, this data translates to pessimism among investors.
On the bullish side, the 1.16 million barrels per day supply cut of the Organization of the Petroleum Exporting Countries and allies, including Russia, (OPEC+) will take effect this month.
Major Oil Exporter’s Stock Market Declined
Furthermore, most major stock markets in the Gulf Cooperation Council, including Saudi Arabia, the United Arab Emirates, and Qatar, traded on the bearish side on Monday.
Most of their currencies are pegged to the US dollar and closely follow the Fed’s policy decision, It exposes the region to a direct impact from the monetary tightening in the world’s largest economy.
The main share index of Dubai plunged by 0.10%, hit by a 1.10% decline in Emirates NBD Bank and a 0.80% fall in utility firm Dubai Electricity and Water Authority.
In Abui Dhabi, its index dived by 0.60%, pulled by a 1.40% retreat from the lender First Abu Dhabi Bank.
