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Oil prices slide 1% after US Fed raises interest rates

Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China August 22, 2019. REUTERS/Stringer

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NEW YORK, Sept 21 (Reuters) – Oil prices fell about 1% to a near two-week low in volatile trade on Wednesday after the US Federal Reserve delivered another hefty rate hike to quell inflation that could reduce economic activity and demand for oil.

The Fed raised its target interest rate by 75 basis points for the third time to a 3.00-3.25% range and signaled more large increases to come. Risk assets like stocks and oil fell on the news, while the dollar rallied. read more

Brent crude futures settled 79 cents, or 0.9%, lower at $89.83 a barrel, its lowest close since Sept. 8, while US West Texas Intermediate (WTI) crude fell $1.00, or 1.2%, to $82.94, its lowest close since Sept. 7.

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Earlier in the session, oil gained over $2 a barrel on worries about a Russian troop mobilization before dropping over $1 on a strong US dollar and lower US gasoline demand.

US gasoline demand over the past four weeks fell to 8.5 million barrels per day (bpd), its lowest since February, according to the US Energy Information Administration (EIA).

“The stand-out data point is the continuing weakness in gasoline demand. It’s really what’s been haunting this market,” said John Kilduff, partner at Again Capital LLC in New York.

The US Energy Information Administration reported a 1.1 million barrel increase in crude stocks last week, half the build analysts forecast in a Reuters poll.

Russian President Vladimir Putin called up 300,000 reservists to fight in Ukraine and backed a plan to annex parts of the country, hinting he was prepared to use nuclear weapons. read more

US President Joe Biden accused Russia of making “reckless” and “irresponsible” threats to use nuclear weapons. read more

Oil prices soared to a multi-year high in March after the Ukraine war broke out. European Union sanctions banning seaborne imports of Russian crude will come into force on Dec. 5.

“Much of today’s downside appeared related to strength in the US dollar and we still view near-term US dollar direction as a critical component in assessing near-term oil price direction,” analysts at energy consulting firm Ritterbusch and Associates said.

The dollar

Signs of a recovery in Chinese demand gave prices a lift early in the session.

In the United States, however, the economic news was not so good. Existing home sales dropped for the seventh straight month in August as affordability deteriorated further amid surging mortgage rates. read more

In Europe, “government are intervening in energy markets in an attempt to stave off economic crisis,” analysts at energy consulting firm EBW Analytics said in a note.

Germany agreed to nationalize natural gas company Uniper SE (UN01.DE), while the British government said it would cap wholesale electricity and gas costs for businesses. read more

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Additional reporting by Ahmad Ghaddar in London, Yuka Obayashi in Tokyo, Isabel Kua and Florence Tan in Singapore and Laila Kearney in New York; Editing by David Gregorio, Kirsten Donovan and Marguerita Choy

Our Standards: The Thomson Reuters Trust Principles.

Scott Disavino

Thomson Reuters

Covers the North American power and natural gas markets.

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