Oil falls 3% as investors eye US Fed hike
Oil prices fell over 3% on Wednesday as investors worried that the Federal Reserve's rate rises would send the US economy into recession, lowering demand for fuel.
Oil prices fell over 3% on Wednesday as investors are worried that the Federal Reserve's rate rises would send the US economy into recession, lowering demand for fuel.
Brent oil futures dropped $2.91, or 2.5 percent, to $111.74 a barrel. The global benchmark fell to $107.03, its lowest level since May 19.
West Texas Intermediate (WTI) crude oil in the United States decreased $3.33, or 3%, to close at $106.19 per barrel. The low for the session was $101.53, the lowest since May 11.
On Wednesday, investors examined how interest rate increases intended to calm skyrocketing inflation may impede an economic rebound.
However, oil prices recovered throughout the session, when Fed Chair Jerome Powell declared an "overarching focus" on lowering inflation and reaffirmed that continued hikes in the central bank's policy rate would be reasonable, with the pace dependent on the economic outlook.
According to Phil Flynn, an analyst at Price Futures, "Powell seemed to change the mood of the market by seeming confident about the US economy. His words have soothed the market and put a bottom on prices for the short-term."
US President Joe Biden will ask Congress to suspend the federal gas tax of 18.3 cents per gallon for three months, as the US struggles to combat high inflation.
Republicans, in particular, have characterized a potential gas tax suspension as a political stunt by a president whose popularity has plummeted as the cost of a variety of goods has risen.
It is worth noting that the Biden administration has constantly claimed that higher fuel prices are the result of the war in Ukraine and alleged price gouging by energy companies.
On his account, Biden has blamed companies for not refining enough oil for affecting supply.
The US Energy Information Administration announced that its weekly oil statistics, which were supposed to be released on Thursday, will be delayed until at least next week owing to system concerns. It is unknown when the EIA will release the report.
The $2.4 trillion in global energy investment planned for this year includes record expenditure on renewables but falls short of filling a supply shortfall and addressing climate change, according to the International Energy Agency.