Crude oil prices fell sharply on Thursday, pushing the most active oil futures contract to a more than three week closing low.
Hawkish comments from Federal Reserve officials, recent data that raised concerns about the interest rate outlook and the surge in Covid-19 cases in China all weighed on oil prices.
The International Energy Agency (IEA) has once again lowered its global oil demand growth estimate for next year, citing significant uncertainties for the oil market such as weak economic growth in China, Europe’s energy crisis and a strong dollar.
West Texas Intermediate Crude oil futures for December ended lower by $3.95 or about 4.6% at $81.64 a barrel.
Brent crude futures were down $2.92 or 3.14% at 89.94 a barrel a little while ago.
Edward Moya, senior market analyst at OANDA, says oil prices are getting punished as crude demand concerns show no signs of easing, with the world’s two largest economies struggling as China battles COVID and the U.S. is seeing a significant drop with manufacturing activity.
Moya says some of the geopolitical risk that sent oil higher earlier this week is coming off the table, adding that with no immediate escalation in the war in Ukraine, energy traders will fixate on the Russian crude price cap that takes hold early next month.
Moya also feels that St. Louis Federal Reserve President James Bullard’s comment that the policy rate is not yet “sufficiently restrictive” is a big reminder that the labor market needs to weaken significantly before pricing in the end of the Fed’s tightening cycle.
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