Oil Holds Loss as Hawkish Powell Spurs Flight From Risk Assets

By Bloomberg

Mar 08, 2023

image is BloomburgMedia_RR5KI0T0G1LA01_08-03-2023_05-19-58_638138304000000000.jpg

A light illuminates a bridge across storage silos inside the Oiltanking Deutschland GmbH tank farm in Berlin, Germany, on Monday, Dec. 5, 2022. After months of planning and negotiations, the European Union and the UK have banned the import of seaborne Russian oil in a historic intervention in the global market. Photographer: Krisztian Bocsi/Bloomberg

(Bloomberg) -- Oil held a deep loss after Federal Reserve Chair Jerome Powell signaled the central bank is likely to boost interest rates higher and potentially faster than previously anticipated, raising concerns over a drag on demand.

West Texas Intermediate traded above $77 a barrel after closing 3.6% lower on Tuesday, the biggest one-day decline since early January. The remarks, made during a testimony before Congress, opened the door to the Fed lifting interest rates by half a percentage point at the next meeting this month.

Adding to the bearishness, OPEC Secretary-General Haitham Al-Ghais said that slowing oil consumption in Europe and the US poses a concern for the market, even as Asia experiences “phenomenal” growth. Citigroup Inc. also said that global supply is ample and demand remains low.

Oil has had a choppy year as concerns over further monetary tightening from the Fed competed with a bullish outlook for China after the end of Covid Zero. However, the world’s top crude importer this week set a cautious economic growth target for 2023, denting some of the optimism.

“The prospect of rates rising, and to a potentially higher endpoint, may see demand come under pressure,” said James Whistler, managing director of brokerage Vanir Global Markets Pte. “This will most likely offset any bullishness caused by stronger Chinese demand.”

More stories like this are available on bloomberg.com

By Yongchang Chin