Oil prices down due to demand fears after BOE rate hike

Oil prices fell for the second session in a row and are heading for a weekly decline of more than 3 percent today, Friday, as higher-than-expected interest rates in Britain and warnings of a soon rate hike in the United States stoked concerns about demand.

By 0655 GMT, Brent crude futures fell 56 cents, or 0.8 percent, to reach $ 73.58 a barrel, while US West Texas Intermediate crude futures fell 60 cents, or 0.9 percent, to $ 68.91 a barrel.

According to “Reuters,” Tina Teng, an analyst at CMC Markets, said, “Fears of a recession are escalating again in the wake of the interest rate hikes announced by central banks and the monetary tightening tone adopted by the Federal Reserve.”

The rise in US dollar, which has already risen 0.3 percent this week, could affect the demand for oil and raise the price of crude for holders of other currencies.

The two benchmarks fell nearly $3 in the previous session after the British central bank raised interest rates by half a percentage point, raising fears of a slowdown in the economy, affecting demand for crude.

The market is now awaiting the release of purchasing managers’ indices from around the world on Friday to see manufacturing activity and demand trends.

On the supply side, US crude inventories posted a surprise drop last week supported by strong demand for exports and lower imports, the Energy Information Administration said Thursday. However, gasoline and distillate stocks rose

Jerome Powell, Chairman of the Federal Reserve (US Central Bank), said that the bank will move interest rates again, albeit at a “cautious pace,” while policymakers are heading towards ending a historic cycle of monetary tightening.

Higher interest rates increase borrowing costs for businesses and consumers, which could slow economic growth and reduce demand for oil.