Oil prices fall as economic outlook outweighs tight supply

Oil prices fall as economic outlook outweighs tight supply

Oil prices declined on Tuesday due to the combination of a stronger U.S. dollar and concerns about the impact of higher interest rates on fuel demand. Brent crude futures dropped by 1.24% to $92.13 a barrel, while U.S. West Texas Intermediate crude futures fell by 1.26% to $88.55.

Tina Teng, a market analyst at CMC Markets in Auckland, stated that the oil market’s movement may be dominated by fears of an economic recession, as U.S. bond yields surge following the Federal Reserve’s hawkish stance last week.

The U.S. Federal Reserve and the European Central Bank have both reiterated their commitment to fight inflation, signaling that tight monetary policy may persist longer than expected. Higher interest rates can slow economic growth and reduce oil demand.

In addition, the U.S. dollar reached a 10-month high on Tuesday, attracting investors due to higher bond yields. A stronger dollar typically weighs on oil demand as it becomes more expensive for importers.

Moody’s warned that a U.S. government shutdown would harm the country’s credit, adding to concerns about the oil market’s ability to reach the $100 per barrel target. However, supply remains tight as Russia and Saudi Arabia have extended production cuts.

JP Morgan noted that oil prices have risen by around 30% since mid-year, primarily due to tighter supply. This has resulted in a 0.5 percentage point reduction in global GDP growth in the second half of the year. However, JP Morgan believes that the impact is not significant enough to threaten economic expansion.

Overall, the combination of a stronger dollar, concerns about higher interest rates, and potential government shutdowns may continue to impact oil prices. However, supply constraints are expected to support prices in the long term.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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