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A Sustained Oil Rally Seems Unlikely Amid Rampant Inflation

U.S. West Texas Intermediate crude oil futures are in a position to finish the week lower after a promising finish the prior week. The selling pressure started early Monday with the market sinking nearly 2% after five straight sessions of gains. The catalyst behind the weakness was growing worries that the gathering of economic storm clouds could be foreshadowing a global recession that could erode fuel demand.

Fed Rate Hike Worries Fuel Recession Fears

Crude oil prices were capped early in the week amid comments from U.S. Federal Reserve officials about rising interest rates and their effect on the economy.

Fed Vice Chair Lael Brainard said the economy is starting to feel more restrictive monetary policy, but the full brunt of the central bank’s interest rate hikes will not be apparent for months.

Brainard’s comments followed remarks by Chicago Fed President Charles Evans that there was a strong consensus at the Fed to raise the target policy rate to around 4.5% by March and hold it there.

China COVID Flare-Up Contributes to Bearish Tone

Prices continued to weaken mid-week as recession fears and a flare-up in COVID-19 cases in China raised concerns over global demand.

World Bank President David Malpass and International Monetary Fund Managing Director Kristalina Georgieva warned of a growing risk of a global recession and said inflation remained a continuing problem.

Fears of a further hit to demand in China also…


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