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Oil fell Thursday, losing ground on fears aggressive tightening by the Federal Reserve will tip the economy into recession, while the U.S. dollar rose sharply.
Price action
-
West Texas Intermediate crude for December delivery
CL.1,
-1.38% CLZ22,
-1.38%
fell $1.40, or 1.6%, to $88.60 a barrel on the New York Mercantile Exchange. - January Brent crude BRN00 BRNF23, the global benchmark, was down $1.19, or 1.2%, at $94.98 a barrel on ICE Futures Europe.
-
Back on Nymex, December gasoline
RBZ22,
-0.14%
fell 0.7% to $2.68 a gallon, while December heating oil
HOZ22,
-0.51%
was down 0.6% at $3.654 a gallon. -
December natural gas
NGZ22,
-4.29%
dropped 3.9% to $6.024 per million British thermal units.
Market drivers
The Federal Reserve on Wednesday raised its key interest rate by 75 basis points, or 0.75 percentage points, as expected, delivering a policy statement that was interpreted as a signal that the size of rate increases would likely fall at the December meeting.
Fed Chair Jerome Powell, in a subsequent news conference, said that while smaller rate rises may be in store in future meetings, it was premature to talk about a pause in rate increases and that the peak in rates would be higher than Fed officials previously thought and that rates would likely remain high for a long period, while the path to a “soft landing” for the economy had narrowed due to persistently high inflation.
See: 5 things we learned from Jerome Powell’s ‘whipsaw’ press conference
Fears that aggressive rate increases by the Fed and other major central banks will crimp demand have been a negative for crude. It “looks as if the market could be digesting the outcome of the [Fed] meeting, with WTI down more than 1% at the time of writing,” said Warren Patterson, head of commodities strategy at ING, in a note.
Read: What’s next for markets after Fed’s 4th straight jumbo rate hike
The dollar rose sharply following the Fed meeting, with the ICE U.S. Dollar Index
DXY,
a measure of the currency against a basket of six major rivals, up 1.5%. The index is up nearly 18% in the year to date and is off 1.5% from a more than 20-year high set in September.
A stronger dollar is seen as a negative for commodities priced in the unit, making them more expensive to users of other currencies.
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