Oil prices tumbled on Friday and were on track for a second weekly drop as investors assessed the impact of aggressive rate hikes on energy consumption, offsetting the prospect of stronger fuel demand in China and higher output cuts by the Organization of the Petroleum Exporting Countries (OPEC).
International benchmark Brent crude futures fell 0.9% to $91.50 per barrel after nearly touching an all-time high of $147 in March. Brent later recovered, trading 0.4% higher to $92.83 per barrel.
The US West Texas Intermediate (WTI) crude futures declined 0.2% to $84.34 per barrel and was expected to drop more than 2%. The benchmark has also bounced back by 0.5% to $84.94 per barrel.
Both benchmarks rose in the previous session after China reportedly considered reducing inbound travelers’ COVID quarantine period to seven days from ten days.
Oil analyst Stephen Brennock said the surge offered a valuable glimpse of what to expect more of the restrictions are lifted.
Leading crude importer China has maintained its strict anti-COVID measures this year, which has held back business and economic performance and weaker demand for fuel.
Oil prices have also strengthened from the European Union’s (EU) pending embargo on Russian oil and the latest output reductions by the OPEC and allies (OPEC+).
EU’s ban on refined products is set to take effect on February 5, while the bloc is due to cease imports of Russian crude on December 5.
More Rate Hikes from Fed Offsets Demand Hopes
Offsetting optimism from hopes of China’s less strict quarantine measures and the OPEC+’s production cuts, Philadelphia Fed President Patrick Harker stated on Thursday that the US central bank would continue raising interest rates to slow the economy and tame the decades-high inflation.
Harker’s comments weakened oil demand expectations, with this week’s possible weekly loss in prices expected to follow the past week’s loss prompted by the recent US inflation data that underscored looming economic challenges.
Financial markets now see the Fed raising interest rates by another 75 basis points when it meets in November.
Following criticism for not taking immediate action in controlling higher consumer prices and not keeping up with the inflation curve, the Fed has doubled its efforts to push prices down by taking a hawkish stance.
