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Oil futures fell Friday, with crude on track for weekly declines, as a round of tough talk on inflation from central bankers stoked renewed concerns about an economic slowdown.
Price action
-
West Texas Intermediate crude for March delivery
CL.1,
-2.62% CLH23,
-2.62%
fell $2.49, or 3.2%, to $76 a barrel on the New York Mercantile Exchange, putting the U.S. benchmark on track for a 4.7% weekly fall, FactSet data show. -
April Brent crude
BRN00,
-2.30% BRNJ23,
-2.30% ,
the global benchmark, lost $2.36, or 2.8%, to trade at $82.78 a barrel on ICE Futures Europe, leaving it down 4.2% for the week. -
Back on Nymex, March gasoline
RBH23,
-1.70%
fell 2.4% to $2.3774 a gallon, while March heating oil
HOH23,
-2.94%
declined 3.8% to $2.7037 a gallon. -
March natural gas
NGH23,
-5.06%
fell 4.9% to $2.273 per million British thermal units.
Market drivers
Oil was under pressure along with equity markets after remarks by a pair of U.S. Federal Reserve officials on Thursday raised the possibility of the central bank resuming supersize rate hikes in response to sticky inflation readings.
Oil prices “caught between a rock and a hard place or, to put it another way, the Fed and a hard landing,” said Stephen Innes, managing partner at SPI Asset Management, in a market update.
Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard, in separate appearances, said they each saw a case for a 50 basis-point, or half a percentage point, rate increase at the Fed’s Jan. 31-Feb. 1 meeting, when policy makers delivered a 25 basis point rise.
European Central Bank Executive Board member Isabel Schnabel also warned that markets may be underestimating inflation, and the risk that the ECB “may have to act more forcefully” against it.
The possibility of more aggressive rate hikes by the Fed has helped to strength the dollar, with the ICE U.S. Dollar index
DXY,
trading 0.4% higher for the week.
Also, with “oil rallies constantly petering out, traders had turned wary, especially as higher-than-expected U.S. and Russian production and the loss of gas-to-oil switching left the oil market with higher-than-expected global inventories,” said Innes. “Higher inventories are not typically the calling card for a running of the bulls in oil markets.”
On Wednesday, the Energy Information Administration reported that U.S. commercial crude inventories rose by 16.3 million barrels for the week ended Feb. 10, with supplies up an eighth consecutive week.
While the supply climb was “primarily due to a data adjustment, it continues to suggest market’s face a near-term oversupply of crude as refiners have been slow to respond,” said Robbie Fraser, manager, global research & analytics at Schneider Electric, in a daily note.
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