HOUSTON: Oil prices fell 2 percent in volatile trading on Monday, ending a three-day streak of gains, on fears that aggressive US interest rate hikes may lead to a global economic slowdown and dent fuel demand.
Brent crude futures for October settlement fell $2.33, or 2.3 percent, to $94.39 a barrel by 11:35 a.m. ET (1535 GMT).
US West Texas Intermediate crude for September delivery — due to expire on Monday — was down $2.14, or 2.4 percent, at $88.63. The more active October contract was down $2.10, or 2.2 percent, at $88.34.
“The short- to medium-term trends for oil is down at present ... oil prices are reflecting the diminishing economic growth outlook right now as key demand-side regions such as the US and China have shown signs of negative (US) and slowing (China) growth,” said Shaun Murison, senior market analyst at foreign exchange trading provider IG.
The US Federal Reserve will raise rates by 50 basis points in September amid expectations inflation has peaked and growing recession worries, according to economists in a Reuters poll.
Also pressuring prices were worries over slowing fuel demand in China, the world’s largest oil importer, partly because of a power crunch in the southwest.
Meanwhile, the leaders of the US, Britain, France and Germany discussed efforts to revive the 2015 Iran nuclear deal, the White House said on Sunday, which could allow sanctioned Iranian oil to return to global markets.
High natural gas prices exacerbated by reduced supply from Russia is strengthening oil demand, said Ole Hansen, head of commodity strategy at Saxo Bank.
“While funds continued to sell crude oil in anticipation of an economic slowdown, the refined product market was sending another signal with refinery margins on the rise again, partly due to surging gas prices making refined alternatives, such as diesel, look cheap,” Hansen said.
Supply worldwide remains relatively tight, with the operator of a pipeline supplying about 1 percent of global oil via Russia saying it will reduce output again because of damaged equipment.
OPEC+ produced 2.892 million barrels per day below their targets in July, two sources from the producer group said, as sanctions on some members like Russia and low investment by others stymied its ability to raise output.
