Oil posts worst decline of past month over demand worries

ANKARA

Oil prices fell around $3 a barrel, posting their steepest decline since last month over fears that the US Federal Reserve (Fed) will raise the policy rate above expectations, flooding the market with demand concerns.

International benchmark Brent crude traded at $81 per barrel at 9.48 a.m. local time (0648GMT), down 0.72% from the closing price of $81.59 a barrel in the previous trading session.

At the same time, American benchmark West Texas Intermediate (WTI) traded at $75 per barrel, a 0.95% decrease after the previous session closed at $75.72 a barrel.

Barrel price of Brent rose to $84 on Thursday and fell as low as $80.94 at the beginning of Friday’s session.

Both benchmarks have been on a downward track since the beginning of the week as investors were awaiting further US Fed interest rate hikes.

Demand concerns were fueled extensively after Fed Chair Jerome Powell's comments that rate hikes are "likely to be higher" than previously anticipated.

Prices declined despite an unexpected fall in the US commercial crude oil inventories, signaling a rise in demand in the US, the world's biggest oil consuming country,

According to data released by the Energy Information Administration (EIA) late Wednesday, US crude stockpiles decreased by 1.7 million barrels to 478.5 million barrels, against the market expectation of a drop of 308,000 barrels.

International air traffic recovers from pandemic

Limiting further price declines, the International Air Transport Association (IATA) data showed that global air traffic grew 67% year-on-year in January, thanks to the continuation of the upward trend in travel demand.

"Air travel demand is off to a very healthy start in 2023," Willie Walsh, IATA’s director general, said in a statement on Wednesday.

Fueled by the lifting of the zero-COVID policy in China, domestic air traffic surged 32.7% from a year ago in January and reached to 97.4% of the January 2019 level, according to IATA data.

International air traffic has more than doubled compared to a year earlier with all markets recording strong growth, led by carriers in the Asia-Pacific region.

Walsh stressed that the rapid removal of COVID-19 restrictions for Chinese domestic and international travel bodies will back the recovery in the sector this year.

"And, importantly, we have not seen the many economic and geopolitical uncertainties of the day dampening demand for travel," said Walsh.