BENGALURU: Oil prices fell by $2 per barrel on Wednesday as investors grew more worried that recent economic data will encourage more aggressive interest rate hikes by central banks, pressuring economic growth and fuel demand.
Brent crude futures for April delivery were down $2.01, or 2.4%, to $81.04 a barrel at 11:33 a.m. EST (1633 GMT), while the West Texas Intermediate (WTI) crude futures dropped by $1.99, or 2.6%, to $74.37 a barrel.
Minutes from the US Federal Reserve’s latest policy meeting are due on Wednesday and are expected to hint at how much further interest rates may need to rise to slow inflation in an economy that has remained stronger than expected through several rounds of monetary tightening.
“While better US economic data should mean better oil demand, the concern is that this forces the Fed to overtighten monetary policy to bring inflation under control,” said UBS analyst Giovanni Staunovo.
“This is also supporting the US dollar, which is not of help for oil.” The US Dollar Index gained for a second straight session, making dollar-denominated oil more expensive for holders of other currencies.
Other US economic reports, however, showed some troubling signs for the world’s biggest oil consumer. Sales of existing homes fell in January to their lowest since October 2010.
According to a preliminary Reuters poll on Tuesday, analysts forecast a rise in US crude inventories, feeding demand worries. The American Petroleum Institute, an industry group, releases its inventory report at 4:30 p.m. ET (2130 GMT).
The economic outlook across Europe continues to show resilience, UBS said in a note after business surveys released on Tuesday showing surprisingly strong growth.
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