On Monday, oil prices dropped as worries about the possible economic impact of a US Federal Reserve interest rate hike and worse Chinese industrial data offset the positive effects of additional Opec+ supply cutbacks.
At its meeting on May 2-3, the Federal Reserve is widely expected to announce a 25 basis point rate hike. On Monday, the US dollar strengthened against a group of other currencies, raising the cost of oil for consumers using other currencies.
At 08:22 GMT, the price of a barrel of Brent crude oil had dropped by $1.21, or 1.5 percent, to $79,12, while a barrel of U.S. West Texas Intermediate (WTI) crude oil had dropped by 96 cents, or 1.3 percent, to $75,82.
According to Baden Moore, head of commodity and carbon strategy at National Australia Bank (NAB), “the prospect of further rate hikes to be announced by the Fed this week is expected to drive an increase in near-term price volatility.”
The European Central Bank is projected to raise interest rates by a quarter point on Thursday, while the Reserve Bank of Australia is largely predicted to extend a rate hike halt on Tuesday.
Weak Chinese economic statistics also played a role in oil price drop
Weak Chinese economic statistics also played a role. The Chinese manufacturing PMI fell to 49.2 in April from 51.9 in March, falling below the 50-point threshold that distinguishes growth from contraction on a monthly basis.
The Organisation of the Petroleum Exporting Countries and its allies, including Russia, have agreed to decrease production by about 1.16 million barrels per day beginning in May.
According to NAB’s Moore, “we believe the oil market will be in deficit through the remainder of the second quarter” as a result of the Opec+ reduction, and the bank anticipated that the cuts, along with increasing demand, would result in higher oil prices.
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