Oil prices drop as US Federal Reserve chair warns of tightening monetary policy
1 min read 26 Aug 2022, 09:14 PM ISTUnited States Federal Reserve Chair Jerome Powell said that the US economy will need tight monetary policy ‘for some time’ before inflation is under control
PremiumOil prices on Friday witnessed a drop following the head of the United States Federal Reserve warning of tightening monetary policy, noting that there is no quick cure for inflation, even as talk of a hefty European Central Bank rate hike managed to stoke demand worries.
United States Federal Reserve Chair Jerome Powell said that the US economy will need tight monetary policy "for some time" before inflation is under control, a fact that means slower growth, a weaker job market and "some pain" for households and businesses. Following these remarks, oil futures, along with Wall Street's main stock indexes reportedly witnessed a drop, according to Reuters report.
According to Phil Flynn, an analyst at Price Futures group in Chicago, “the market is taking (Powell) at his word. The stock market has given up its gains and I think oil was very concerned about it." Brent crude futures declined 51 cents to $98.83 a barrel by 11:01 a.m. EDT (1501 GMT). U.S. West Texas Intermediate (WTI) crude futures fell 86 cents to $91.66 a barrel, the Reuters report said.
Meanwhile, earlier in the session, both contracts had risen by over $1, supported by strong U.S. economic data a day earlier, while overall, Brent was on track for a weekly gain of around 2.2%, while WTI was set to rise 0.8%, the report said.
Some European Central Bank policymakers want to discuss a 75 basis point interest rate hike at a Sept. 8 policy meeting, even if recession risks loom, as the inflation outlook is deteriorating, five sources with direct knowledge of the process told Reuters. Price losses were limited as OPEC's de facto leader Saudi Arabia on Monday flagged the possibility of production cuts to offset the return of Iranian barrels to oil markets should Tehran clinch a nuclear deal with the West, the report said.
Yesterday, on Friday, the United Arab Emirates became the latest OPEC+ member to state it is aligned with Saudi Arabia's thinking on crude markets, a source with knowledge of the matter told Reuters. "The impression remains that Saudi Arabia is not willing to tolerate any price slide below $90. Speculators could view this as an invitation to bet on further price rises without the need to fear any more pronounced price declines," Commerzbank said in a note.
(With inputs from Reuters)
