OIL FALLS FROM ONE-MONTH HIGH ON OPEC+ SUPPLY PLANS, US FUEL INVENTORY SURGE
03 Nov 2022
Oil slipped on Thursday as a U.S. interest rate hike pushed up the dollar and increased fears of a global recession that would crimp fuel demand, although losses were capped by concerns over tight supply.
Brent crude dropped 85 cents, or 0.9%, to $95.30 a barrel at 0750 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell $1.01, or 1.1%, to $88.99.
Both benchmarks settled up more than $1 on Wednesday, aided by another drop in U.S. oil inventories, even as the Fed boosted interest rates by 75 basis points and Chair Jerome Powell said it was premature to think about pausing rate increases.
A strong dollar is dragging down oil, with some market participants also likely booking profits following recent gains, CMC Markets analyst Tina Teng said.
A strong dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.
“With the Fed confirming a higher peak in rates, a darkened global economic outlook could continue to pressure the oil futures markets,” Teng added.
Stephen Innes, the managing partner of SPI Asset Management, said that it was surprising oil had proved so resilient after the move by the Federal Reserve, but he noted there were a couple of fundamental factors putting a floor under prices.
The European Union’s embargo on Russian oil for its invasion of Ukraine is set to start on Dec. 5 and will be followed by a halt on oil product imports in February.
Also likely to keep supply tight in coming months, producers from the Organization of the Petroleum Exporting Countries (OPEC) may struggle to hit previously set output quotas, ANZ analysts said in a note.
On technical fronts, BRENT CRUDE OIL: RSI stood at 70.21, and currently it is trading above all MA. So, the BUY position can be taken with the following target and stop loss: