Oil down as US Fed Chair’s warning on further interest rate hikes compounds demand woes

By Sibel Morrow

ANKARA (AA) - Oil prices slipped on Thursday over surging demand fears after US Federal Reserve (Fed) Chair Jerome Powell highlighted the possibility of further interest rate hikes in the battle against inflation, although strong crude oil inventory data restrained further price declines.

International benchmark Brent crude traded at $76.91 per barrel at 09.53 a.m. local time (0653 GMT), a 0.27% loss from the closing price of $77.12 a barrel in the previous trading session on Wednesday.

The American benchmark West Texas Intermediate (WTI) traded at the same time at $72.36 per barrel, down 0.23% from the previous session's close of $72.53 per barrel.

Both benchmarks came under downward pressure, with Fed Chair Powell signaling on Wednesday the likelihood of future interest rate hikes to lower inflation.

"Nearly all FOMC (Federal Open Market Committee) participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year," Powell wrote in prepared remarks in his testimony before the Committee on Financial Services at the House of Representatives.

The Fed avoided raising interest rates at the end of its two-day meeting last week, as largely predicted, and held the federal funds rate constant at between 5% and 5.25%.

The central bank's latest projections, however, indicate that two more rate hikes of 25 basis points each are likely for the remainder of the year.

Nonetheless, prices received upward support when the American Petroleum Institute (API) announced late Wednesday an estimated decrease of 1.2 million barrels in US crude oil inventories, more than the market expectation of a 433,000-barrel draw.

If crude stocks rise faster than predicted, it indicates less demand and a bearish outlook for crude prices.

The US Energy Information Administration's (EIA) data on oil stocks will be announced later on Thursday, and if the decline in stock levels is confirmed, prices are expected to further decline.

- Strong dollar aids price slumps

Dollar-indexed oil prices came under further pressure from the rising value of the greenback.

The US dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc, rose 0.07% to 101.74.