Oil prices sink as demand fears overtake OPEC-led rally


Oil prices fell on Tuesday as concern returned about the prospect of more interest rate hikes and COVID-19 lockdowns weakening fuel demand, reversing a two-day rally on OPEC+’s first output target cut since 2020.

Brent crude was down $2.89, or 3 per cent, to $92.85, while U.S. West Texas Intermediate (WTI) fell from Monday’s trading to $86.84, down 3 cents from Friday’s close.

The U.S. benchmark has been trading since Sunday without settlement due to the Labor Day holiday. WTI prices are down more than 3 per cent from the usual time of settlement on Monday, Refinitiv Eikon data shows.

Beijing has eased some COVID-19 curbs but extended lockdowns in Chengdu, which added to worries that high inflation and interest rate hikes will hit oil demand. The European Central Bank is widely expected to lift rates sharply when it meets on Thursday.

A stronger U.S. dollar, which was up about 0.6 per cent on better-than-expected U.S. services industry data, also put pressure on oil prices.

The reading on services sector activity fed into expectations that the Federal Reserve will keep raising interest rates, which could trigger a recession and bring down fuel demand.

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