Oil down as multiple interest rate hikes raise demand woes

ANKARA

Oil prices fell slightly Friday as concerns about global economic growth weighed on markets in the aftermath of multiple interest rate hikes around the world, coupled with demand worries as China pursues its COVID-19 measures.

International benchmark Brent crude was trading at $119.74 per barrel at 0701GMT for a 0.05% decrease after closing the previous session at $119.81 a barrel.

American benchmark West Texas Intermediate (WTI) was at $117.44 per barrel at the same time for a 0.12% loss after the previous session closed at $117.59 a barrel.

In an attempt to fight rising consumer prices, several countries have raised interest rates.

Fueling oil demand concerns, the US Federal Reserve raised its key policy rate on Wednesday, the largest since 1994. Within hours, Brazil, Saudi Arabia, and others announced rate hikes, followed by Switzerland and the UK on Thursday.

Speaking on the sidelines of the St. Petersburg International Economic Forum (SPIEF) Russian Deputy Prime Minister Alexander Novak said Russia does not rule out further increases in oil prices by the end of the year, “though everything will depend on the demand and supply balance.”

Novak added that Russia remains optimistic about global demand despite the uncertainty surrounding possible COVID-19-related lockdowns in China.

Investor woes about weak demand reinforced further after reports that China is set to ramp up anti-pandemic efforts in Hong Kong to tackle a recent surge in coronavirus cases.

On Thursday, US Ambassador Nicholas Burns told the Brookings Institution that the lockdowns were disrupting supply chains and making foreign businesses wait before considering further investment.

A survey by the American Chamber of Commerce in Shanghai also confirmed Burns’s argument.

According to the survey, one quarter of US firms were scaling back investment plans and nearly all were dropping revenue forecasts after the lockdown in the business hub.

The reports that the US is placing new sanctions on Iran limited further losses.

In an e-mailed note, Australia and New Zealand Banking Group (ANZ) commodity strategist Daniel Hynes recalled that the US Treasury Department said it sanctioned a network of Iranian petrochemical producers as well as front companies in China and the UAE which support companies it says broker petrochemical sales abroad.

"The market has been watching negotiations between the West and Iran in anticipation of revival of the nuclear deal in recent months," he said, noting that this brought back into focus the ongoing supply side issues in the market.