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Oil Ends Week With 6% Plunge After Fed’s Hawkish Tilt

Business Maverick

Business Maverick

Oil Ends Week With 6% Plunge After Fed’s Hawkish Tilt

An oil pump jack on Thurs. April 7, 2022 in Midland, TX. Inflation is higher in the Midland/Odessa area than in the rest of the country and many who may not be able to afford basic needs with prices increasing have sought help from outside sources. (Sergio Flores/Bloomberg) Photographer: Sergio Flores/Bloomberg
By Bloomberg
17 Jun 2022 0

Oil fell the most in 5 weeks as Federal Reserve Chair Jerome Powell reiterated his will to curb the hottest inflation in decades.

West Texas Intermediate dropped to near $111, shedding as much as 5.9%. Federal Reserve Chair Jerome Powell this week openly endorsed for the first time raising interest rates well into restrictive territory, a strategy that’s often resulted in an economic downturn. On Friday he reiterated that the Fed is focused on returning inflation to its 2% target.

Trading volumes in US crude futures were well below normal on Friday ahead of the US Juneteenth holiday on Monday.

Oil poised for the first weekly decline since late April

Russia’s invasion of Ukraine has compounded global price increases and helped to drive up the cost of everything from food to fuels. US retail gasoline prices have repeatedly broken records and the national average recently topped $5 a gallon. The White House is weighing limits on fuel exports to try to alleviate the pain at the pump.

“Oil markets have focused on macro this week,” said Keshav Lohiya, founder of consultant Oilytics. “However, we wonder what 25 basis point or even 50 basis point increases will do when the bulk of the inflation is coming from commodities.”

Crude is still up more than 50% this year as rebounding demand combined with upended trade flows following Russia’s invasion of Ukraine to squeeze the market. All commodity price moves have become more extreme as market liquidity has slumped and if crude comes under Western secondary sanctions oil could spike sharply higher, JPMorgan Chase & Co. analysts including Natasha Kaneva wrote in a report.

Prices
  • WTI for July delivery fell $6.88 to $110.71 a barrel at 10:53 a.m. in New York.
  • Brent for August settlement lost $6.18 to $113.63 a barrel.

As the war in Ukraine continues, the focus remains on the extent to which Russian oil flows will be altered. On Friday, the country’s Deputy Prime Minister Alexander Novak said throughput at the nation’s refineries could fall 10% this year.

Related coverage:
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