Oil slumps nearly 3pc

NEW YORK: Oil prices tumbled about 3% on Wednesday as investors worried that rate hikes by the Federal Reserve could push the US economy into recession, dampening demand for fuel.

Brent crude futures were down $2.95, or 2.6%, to $111.70 a barrel by 12:43 p.m. EDT (1643 GMT). It hit a session low of $107.03 a barrel, lowest since May 19. US West Texas Intermediate (WTI) fell $3.15, or 2.9%, to $106.37 a barrel. The session low was $101.53 a barrel, lowest since May 11.

Investors assessed on Wednesday how interest rate hikes designed to cool soaring inflation might stall an economic recovery. Oil prices pared losses, however, during the session after Fed Chair Jerome Powell pledged an “overarching focus” on bringing down inflation and reiterated that ongoing increases in the central bank’s policy rate would be appropriate, with the pace depending on the economic outlook.

“Powell seemed to change the mood of the market by seeming confident about the US economy,” said Phil Flynn, analyst at Price Futures. “His words have soothed the market and put a bottom on prices for the short-term.”

Meanwhile, US President Joe Biden is expected to ask Congress to consider a three-month suspension of the 18.4 cents per gallon federal tax on gasoline and call on states to suspend their fuel taxes, a senior administration official said.

Oil prices stable as market balances recession fears with tight supply

While lower pump prices could actually boost demand for fuel and support crude prices, PVM analyst Stephen Brennock said traders could be worried the Biden administration might take further measures to cool high energy prices.

Lawmakers of both major parties have expressed resistance to suspending the federal gasoline tax, which Biden was expected to announce at 2 p.m. EDT (1800 GMT). The White House asked the chief executives of seven oil companies to a meeting this week to discuss ways to increase production capacity and reduce gasoline prices of around $5 a gallon as they make record profits.