The drop in oil prices is due to interest rate hikes.
Fallen Oil Prices Due To Interest Rate Hikes
Oil prices fell in early Asian trade due to expectations of US interest rate hikes, even though US crude stockpiles decreased. The Fed kept interest rate hikes unchanged but hinted at a rate increase by year-end, which could reduce economic growth and fuel demand.
This news of interest rate hikes, along with a stronger US dollar, placed downside pressure on oil prices. Additionally, data from the US Energy Information Administration showed a smaller-than-expected decline in crude inventories, leading some traders to lock in profits and interest rate hikes happening.
However, according to a published article by Asharq Al-Awsat, concerns about tight supply globally, with low crude stocks at the WTI delivery hub and production cuts by OPEC+, limited the extent of the price falls hence the interest rate hikes being kept at bay.
Economic Growth Dampened
In a published article by Arab News, since oil prices fell in early Asian trade on Thursday, following the largest fall in a month in the previous session, this could dampen economic growth and overall fuel demand.
The US dollar also strengthened, putting downward pressure on oil prices. Some analysts still expect prices to remain supported in the near term due to expected production cuts and low inventories.