WTI Crude Oil heads for weekly loss as rate hikes add to demand concerns

Key points

Futures on US West Texas Intermediate Crude Oil plunged for a second consecutive trading day on Friday and were set for a weekly loss, as rate hike-driven economic growth concerns overshadowed a drop in US oil inventories.

Yesterday the black liquid retreated over 4% after the Bank of England, the Swiss National Bank and Norges Bank raised interest rates.

In addition, Federal Reserve Chair Jerome Powell said earlier this week two more rate increases of 25 basis points by the end of 2023 was a “pretty good guess.”

Rising interest rates translate into higher borrowing costs for individuals and business entities, which could hinder economic growth and cast shadow on the oil demand outlook.

Aggressive policy tightening moves by global central banks lent support to safe haven assets such as the US Dollar, which additionally weighed on dollar-priced Oil.

“Due to strengthening economic headwinds caused by recession fears, only conspicuous stock depletion will herald a protracted change in the currently ominous outlook,” PVM oil analyst Tamas Varga was quoted as saying by Reuters.

Demand-related concerns seemed to have overshadowed some support to the market on the supply side.

The latest inventory data by the US Energy Information Administration showed crude oil stocks had decreased by 3.831 million barrels during the week ending June 16th, while confounding market expectations of a 0.329 million barrel increase.

As of 12:25 GMT on Friday WTI Crude Oil Futures for August delivery were losing 1.52% to trade at $68.45 per barrel.

At the same time, Brent Oil Futures for August delivery were losing 1.28% on the day to trade at $73.19 per barrel.

WTI Crude Oil Futures have retreated 4.50% so far this week, while Brent Oil Futures – 4.55%.