Oil drops as more rate hikes overshadow tightening fuel market

Oil fell after Federal Reserve Chair Jerome Powell said interest rates will go higher than earlier projected, overshadowing tightening supply.

West Texas Intermediate futures dropped toward $89 a barrel after rising 4 per cent over the previous two sessions. Powell said it’s “very premature to be thinking about pausing” after the Fed hiked rates again by 75 basis points.

Major central banks are seeking to tame rampant inflation, which is weighing on energy demand. Bearish sentiment stemming from the rate hikes has offset a tightening fuel market, with US gasoline stockpiles falling to the least since 2014 and distillate supplies on the East Coast near record seasonal lows.

Oil has lost almost a third of its value since early June as concerns over a global economic slowdown filter through the market.

Still, there is uncertainty about supply heading into winter, with OPEC+ implementing sizable output cuts and the European Union set to sanction Russia crude flows.