Oil edges lower on QT decisions, global recession concerns

Crude prices edged lower on accelerating fears linked to global recession risks after another wave of central banks’ decisions regarding quantitative tightening. This is why oil’s latest rally faded as risk aversion grows wilder.

The stronger US dollar makes oil more expensive for those using other currencies. Oil prices slid about 2% on Thursday as traders worried about the fuel demand outlook due to a stronger dollar and further interest rate hikes by global central banks.

After rising for three straight days, Brent futures fell $1.49, or 1.8%, to settle at $81.25 per barrel, versus the previous closing price at $82.82, while WTI crude fell $1.17, or 1.5%, to settle at $76.15 versus the previous closing price at $77.28.

Oil prices seem under pressure today as the Fed’s hawkish guidance for its monetary policy sparked renewed concerns about economic growth, lifting the US dollar and sending commodity prices down.

Federal Reserve Chair Jerome Powell said on Wednesday the US central bank will raise interest rates further next year, even as the economy slips toward a possible recession. On Thursday, the Bank of England and the European Central Bank raised interest rates to fight inflation.

US stock indexes fell sharply as the Federal Reserve’s guidance for protracted policy tightening quelled hopes the rate-hike cycle would end anytime soon.

US retail sales data fell more than expected in November, but consumer spending remains supported by a tight labor market, with the number of Americans filing for unemployment benefits decreasing by the most in five months last week.

In China, the world’s second biggest economy, lost more steam in November as factory output slowed and retail sales extended declines, the worst readings in six months, hobbled by surging COVID-19 cases and widespread virus curbs.

Canada’s TC Energy Corp said it was resuming operations in a section of its Keystone pipeline, a week after a leak of more than 14,000 barrels of oil in Kansas triggered oil facility shutdown, this factor also exercised some additional pressure on crude prices.