Oil prices fell in Asia trading on Wednesday, dragged by worries over potential rate hikes by the European Central Bank (ECB) and Federal Reserve this month, as well as extended COVID-led lockdowns in China.
European Expectations: The ECB will announce its interest rate decision on Thursday, with the market grappling with mixed expectations regarding the quantum of a rate hike in the wake of a struggling economy. However, expectations of a potential 75 bps rate hike are acting as an overhang on oil prices, ignoring the OPEC+ output cut factor.
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Price Action: West Texas Intermediate (WTI) futures were trading at $86.78/barrel, down 0.15% at the time of writing. Crude prices were recently dragged by demand concerns over fears of a recession and aggressive central bank rate hikes to rein in inflation.
Oil prices rose for the last two days after the Organization of Petroleum Exporting Countries and its allies (OPEC+) decided on a modest 100,000 barrel-a-day cut in supply quotas, and a setback in Iranian nuclear deal talks was reported.
The United States Brent Oil Fund BNO closed 0.48% lower, while the Vanguard Energy Index Fund ETF VDE traded over 1.11% lower.
Expert Take: Tamas Varga of oil broker PVM said, “The OPEC+ news is now in the market and the focus has temporarily shifted to economic and inflationary concerns amongst which the two relevant factors are the extended COVID lockdowns in China and Thursday's ECB rate decision," according to Reuters.
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