Oil falls on demand concerns after US interest rate hike

Oil prices fell on Thursday after the Federal Reserve raised interest rates, which led to the rise of the dollar and increased fears of a global recession that will hurt demand for fuel; however, concerns about supplies limited the decline in prices.

By 0750 GMT, Brent crude was down 85 cents, or 0.9 percent, at $95.30 a barrel. West Texas Intermediate crude futures fell $1.01, or 1.1 percent, to $88.99 a barrel.

Both benchmarks rose more than $1 a barrel on Wednesday, supported by another drop in US oil inventories, despite the US central bank raising interest rates by 75 basis points and President Jerome Powell’s announcement that it was too early to consider halting interest rate hikes.

A stronger dollar reduces oil demand as the cost of fuel increases for buyers in other currencies.

An EU embargo on Russian oil due to Moscow’s invasion of Ukraine is due to start on December 5, and a ban on imports of petroleum products will follow in February.

Production from the Organization of the Petroleum Exporting Countries (OPEC) fell in October for the first time since June. The Organization of the Petroleum Exporting Countries and its allies, including Russia, decided to reduce the production target level by 2 million barrels per day from November.

The market is also expecting higher demand from China in the hope that Beijing will ease its anti-coronavirus policies. Chinese officials pledged on Wednesday to keep growth a priority and pursue reforms.