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Oil prices fall more than 2% as Fed hikes interest rates

Brent futures for August settled down $2.7, or 2.2%, to $118.51 a barrel, after falling to $117.75. U.S. West Texas Intermediate crude for July fell $3.62, or 3.04%, to $115.31 a barrel, after hitting a low of $114.60.



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US President Joe Biden has asked oil companies to explain why they aren’t putting more gas on the market

Oil prices fell more than $3 on Wednesday as markets worried about a drop in demand after the Federal Reserve raised interest rates by three-quarters of a percentage point.

Brent futures for August settled down $2.7, or 2.2%, to $118.51 a barrel, after falling to $117.75. U.S. West Texas Intermediate crude for July fell $3.62, or 3.04%, to $115.31 a barrel, after hitting a low of $114.60.

The biggest U.S. central bank hike since 1994 also pushed the dollar higher, with the dollar index hitting its highest level since 2002. A stronger greenback makes U.S. dollar oil more expensive for holders of other currencies, reducing demand.

Meanwhile, U.S. crude production, which has largely been flat for the past few months, edged up 100,000 barrels a day last week to 12 million bpd, its highest level since April 2020, data shows. of the Energy Information Administration. [EIA/S]

“A small part of this uptick in domestic production may be the first sign of more to come there,” said John Kilduff, partner at Again Capital LLC.

The data also showed an increase in crude inventories and U.S. distillate inventories, while gasoline recorded a surprise drop following the summer driving season.

Drivers around the world were tolerating record high prices for on-road fuels, the data showed.

The European Central Bank on Wednesday pledged fresh support and a new tool to temper a market rout that stoked fears of a fresh debt crisis on the eurozone’s southern shore, but appeared to have disappointed investors at the search for bolder measures.

Adding to demand issues, the latest COVID outbreak in China has raised fears of a new phase of lockdown.

Rising oil prices and weakening economic forecasts are clouding prospects for future demand, the International Energy Agency said.

But lingering worries about limited supply meant oil prices still held close to $120 a barrel.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are struggling to meet their monthly crude production quotas, recently hit by a political crisis that has reduced production in Libya.

“Because OPEC production is still significantly below the announced level, this would lead to a supply shortfall of around 1.5 million barrels per day in the oil market in the second half of the year,” said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt.

Oil prices were supported by tight gasoline supplies. US President Joe Biden has asked oil companies to explain why they are not putting more gasoline on the market.

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(Additional reporting by Rowena Edwards in London, Koustav Samanta in Singapore, Sonali Paul in Melbourne and Laura Sanicola in New York; Editing by Marguerita Choy, Jonathan Oatis, David Gregorio and Nick Zieminski)

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