Oil dropped by 3% on Friday and looks to be headed for a red close for the week. This was because traders are worried that the US Federal Reserve would raise interest rates again. This would hurt demand.
From a data point of view, there has been a lot going on this week, from high inflation numbers (CPI report), fresh Producer Price Index (PPI) data, to great retail sales numbers. On Thursday, it looked like oil prices might go back up, but on the last day of trading this week, it doesn’t seem likely.
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Two Fed officials said on Thursday that more increases in interest rates are needed to bring inflation down to the levels the Fed wants. The US dollar really got stronger on these Fed fears acting as a safe haven. This made oil more expensive for people who use other currencies.
The UK benchmark Brent crude futures for April delivery dropped $2.55 with the US market opening. This is a 3% fall to $82.59 per barrel. US traded West Texas Intermediate crude futures for March fell $2.33. This was a 3% drop to $76.16 per barrel.
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Both benchmarks were on track to fall by more than 4% in a single week. Even though the government plans to cut oil production in March, Russian oil producers expect to keep exporting the same amount of crude oil. The Vedomosti newspaper reported this on Friday, citing sources familiar with the companies’ plans.
The most recent report on US supplies, which came out on Wednesday, showed that crude stocks rose by 16.3 million barrels in the week ending February 10th. This is the highest level since June 2021.
Data is not in favor of the bulls
Trading seems to be kept in the range of $73 and $80. Bulls have a hard time these days as the last green close was on Friday February 10th. Bears are looking at the lower trend line with the $72-$73 support area. Bulls need to resume buying pressure to bring the price back to the $80 mark.
WTI 1D chart, source tradingview.com, author’s analysis