Oil price falls amid expectations of another Fed rate hike | Mint - Mint

Oil price falls amid expectations of another Fed rate hike | Mint

After performing well for four weeks, oil price fell on the expectations of another rate hike from the Federal Reserve against signs of a tighter market.West Texas Intermediate fell below $77 a barrel after it closed at a three-month high on Friday. The upswing was the result of expectations supply cuts by OPEC that would reduce inventories, with International Energy Agency Executive Director Fatih Birol saying at the weekend the market could return to a deficit.Also Read: Oil set for fourth straight week of gains amid tightening supply; Brent at $80/bblUS Fed rate hikeThis week there are chances of another rate hike by the US central bank policymakers. The move will be aimed to curb the inflation. Consecutive rate hikes by the US Fed resulted in the world's largest economy into recession. It also affected its energy demand.This year, oil remained lower despite the recent run of gains and production cuts by the Organisation of Petroleum Exporting Countries and its allies including Russia. China's slow recovery has another major factor affecting the demand of commodities like crude oil.Also Read: OVL’s wait for dividend from Sakhalin-1 oil field lengthensDespite demand side crunch, there are signs of strength in the market's underlying structure. The US benchmark's prompt spread-the difference between WTI's two nearest contracts, ie 30 cents a barrel in backwarrdation, bullish pattern that’s at the widest since mid-November on a closing basis.Fall in oil price on MondayOil price fell on Monday because of expectation of rate hikes from US fed , European central banks, and tightening supply and hopes for Chinese stimulus.Also Read: Oil extends gains over cautious trading, lower US crude stocks; Brent near $80/bblBrent crude futures dipped 41 cents, or 0.5%, to $80.66 a barrel by 0045 GMT. U.S. West Texas Intermediate crude was at $76.70 a barrel, down 37 cents, or 0.5%.The benchmarks rose 1.5% and 2.2% respectively last week, their fourth straight of week of gain, as supply is expected to tighten following OPEC cuts. Fighting also escalated last week in Ukraine after Russia withdrew from a U.N.-brokered safe sea corridor agreement for grains exports."While another Fed rate hike this week may drive some short-term price volatility, we expect tightening market conditions on OPEC's supply cuts and increasing market speculation of further stimulus in China to continue to push prices higher through 3Q23," analysts from National Australian Bank said in a note.