Oil’s decline picked up steam as Federal Reserve Chair Jerome Powell’s hawkish testimony to lawmakers overwhelmed a market that had fought through a spate of bearish developments in recent weeks.
(Bloomberg) — Oil’s decline picked up steam as Federal Reserve Chair Jerome Powell’s hawkish testimony to lawmakers overwhelmed a market that had fought through a spate of bearish developments in recent weeks.
Powell’s message that the central bank may raise rates faster than expected — and to a higher endpoint — bolstered a bear case built on swelling US stockpiles and a weaker-than-expected economic growth target from China. Anticipation of the Fed chair’s testimony had already threatened to break a five-day rally for West Texas Intermediate, and his remarks sent prices down even further past technical support levels.
“If the Fed decides that we’re going to strangle inflation until it cries uncle, and by so doing jack up interest rates to the point where there is pain across the economy, that’s not good for GDP,” said Stewart Glickman, deputy director of equity research at CFRA Research. “Oil demand is correlated with GDP, so that would be bad for oil prices.”
Crude has endured a bumpy year, whipsawed by concerns over more tightening from the Fed and a bullish outlook for Chinese demand following the end of its Covid Zero policies. Fluctuations in price and a lack of clear direction have persisted, but prices continue to trade within a $10 range since early December.
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