By Barani Krishnan
Investing.com -- Crude prices fell 2% or more for a third day in a row as growing expectations for a tenth U.S. rate hike since the pandemic and a recession at some point this year weighed on oil markets, offsetting a major boost from a recent OPEC output maneuver.
New York-traded West Texas Intermediate, or WTI, crude was down $1.96, or 2.5%, to $77.28 a barrel by 10:56 ET (14:56 GMT), after a three-week low at $77.19.
The U.S. crude benchmark has lost 6% of its value since the start of this week on recession and rate hike fears that extended the rebound in the dollar and U.S. Treasury yields from last week’s one-year lows.
A higher dollar usually weighs on overseas demand for commodities priced in the currency. Higher U.S. bond yields also sap the appeal of risk-heavy assets, while also limiting flows of foreign capital.
London-traded Brent crude, the global benchmark for oil, was down $2.01, or 2.4%, to $81.11, after a three-week low at $81.01. Like WTI, Brent was down about 6% on the week.
Persistent talk that the Federal Reserve will likely raise interest rates by another quarter point when its policymakers meet in May added to the pressure on those long oil. The Fed has added 475 basis points to rates, bringing them to a peak of 5% from just 0.25% at the start of the coronavirus pandemic in March 2020.
This week’s tumble in oil prices came despite the release of positive U.S. inventory data. Stockpiles of crude oil in the United States fell last week at their largest pace in three weeks, reversing a build from the week prior, as refiners turned out more fuel for commercial vehicles, the Energy Information Information, or EIA, said in its Weekly Petroleum Status Report.
WTI was also down possibly on technical reasons, as it attempts to fill its gap after producer group OPEC+ announced deeper production cuts to lift a market that hit 15-month lows in March on fears of a U.S. banking crisis triggered by the collapse of lender Silicon Valley Bank, or SVB.
“Now it's a question of whether that gap will be filled, with the high from the Friday before falling just shy of $76 in WTI and $78 in Brent,” said Craig Erlam, analyst at online trading platform OANDA “That would require another drop of around 3% but only take the price back to the middle of the range oil was trading in for months prior to the SVB collapse.”