Oil prices are on track for their largest weekly decline in five weeks, with concerns about the potential impact of significant interest rate increases in the United States contributing to a fourth consecutive day of losses on Friday. Brent crude fell by 0.6%, or 48 cents, to $81.11 a barrel at 0434 GMT, while U.S. West Texas Intermediate crude (WTI) dropped 0.8%, or 60 cents, to $75.12 a barrel.
The possibility of continued rate hikes in the world’s largest economy and Europe has cast a shadow over the global growth forecast, causing both crude benchmarks to fall over 5.5% this week, marking their most significant decline since early February.
Jerome Powell, the Chair of the U.S. Federal Reserve, has cautioned that the central bank may increase interest rates at a quicker pace than previously anticipated. Powell has admitted that the Fed was wrong in its initial belief that inflation was temporary and was taken aback by the robustness of the labor market.
Despite an increase in the number of Americans filing for unemployment benefits last week, the labor market remains tight. Analysts from Haitong Futures suggest that investor sentiment has grown increasingly wary.
Financial markets have already suffered significant losses due to concerns that the U.S. jobs report, due to be released on Friday, could prompt the Federal Reserve to accelerate interest rate hikes. Analysts predict that oil prices could also face downward pressure as a result. According to Haitong analysts, all eyes are on the U.S. data, which is expected to be the most critical factor before the Fed’s rate decision.
Meanwhile, the United States has reportedly encouraged some commodity traders to disregard concerns about shipping price-capped Russian oil to increase supply, indicating that more Russian oil may enter the market.