Oil plunged in low-volume trading ahead of the US holiday weekend as hawkish signals from Federal Reserve officials added to concerns about a glut of crude piling up in storage.
(Bloomberg) — Oil plunged in low-volume trading ahead of the US holiday weekend as hawkish signals from Federal Reserve officials added to concerns about a glut of crude piling up in storage.
Oil is en route to its longest string of daily losses this year, weighed down by a significant increase in US crude inventories and a broader risk-off sentiment sparked by the prospect of continued rate hikes from the Fed. The aggregate volume of crude contracts changing hands also was low, exacerbating the move.
Crude has been stuck in a narrow channel since early December. Expectations that China’s recovery from Covid-19 lockdowns will boost global demand in the second half of the year are being tempered by a market that’s currently oversupplied.
“The renewed rangebound trade in oil is causing the market to become wary, demanding more cyclical evidence to invest in the structural bull case,” Goldman Sachs Group Inc. analysts led by Jeff Currie wrote in a note to clients.
Commodity prices more broadly are facing headwinds from the possibility that higher rates will cause a recession, they said.
“The more tied a commodity is to macro sentiment, the bigger the selloff,” the analysts wrote.
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