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Fed Action Caps Crude Prices


U.S. West Texas Intermediate crude oil futures are trading lower late Thursday, pressured by a stronger U.S. Dollar and worries that further aggressive interest rate hikes by the Federal Reserve would cast the economy into recession, leading to lower demand. However, losses are being limited by concerns over tight supply.

Friday’s price action represents a flip from the previous session’s higher close. On Wednesday, the Fed boosted interest rates 75 basis points and Chairman Jerome Powell dampened hopes of smaller rate hikes in December when he said it was premature to think about pausing rate increases. However, that potentially bearish news was flattened by another drop in U.S. crude oil inventories.

Tight supply concerns are being driven by another draw in U.S. stockpiles, an OPEC+ output cut and the upcoming embargo of Russian oil by the European Union.

Worries about a global recession are being fueled by a sharp rise in the U.S. Dollar, which could dampen foreign demand for dollar-denominated oil. The greenback is being bolstered by a surge in Treasury yields, making the dollar a more attractive investment. Yields are being driven higher by hawkish commentary from hawkish Fed Chairman Jerome Powell who said on Wednesday it was premature to consider pausing rate increases.

Fed Signals Higher Peak in Rates

On Wednesday, the U.S. Federal Reserve surprised traders by indicating interest rates would continue higher until inflation…

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