Oil extended losses on Wednesday after plunging 5% in the previous session, as investors priced in expectations for interest rate hikes in the U.S. and Europe and waited for clarity on future policy path.
Brent futures dipped 12 cents, or 0.2%, to $75.20 a barrel by 0605 GMT, while West Texas Intermediate crude (WTI) fell 17 cents, also 0.2%, to $71.49.
Both benchmarks closed at their lowest since March 24 in the previous session, when they also recorded their biggest one-day percentage declines since early January.
“Sentiment in the oil market remains negative,” Warren Patterson and Ewa Manthey, analysts from ING, said in a note to clients. “Investors seem to be getting increasingly nervous about the macro outlook and its implications for oil demand.”
The U.S. Federal Reserve is expected to hike interest rates by an additional 25 basis points on Wednesday to combat inflation, while the European Central Bank is
also expected to raise rates at its regular policy meeting on Thursday.
More hikes could slow economic growth and hit energy demand.
“A 25 basis-point rate hike has been fully priced, so focus will be on how Fed Chair Jerome Powell balances between keeping the Fed’s tightening option open and calming nerves around the renewed banking jitters,” Yeap Jun Rong, market analyst at brokerage IG, said in a note.
Regulators seized First Republic Bank and sold its assets to JPMorgan Chase & Co (JPM.N) on Monday, in a deal to resolve the largest U.S. bank failure since the 2008 financial crisis and draw a line under a lingering banking turmoil.
In Australia, the central bank stunned markets by hiking its cash rate on Tuesday and warned that further tightening may be needed to combat high inflation.
Concerns about diesel demand in recent months, meanwhile, have pushed down U.S. heating oil futures to their lowest level since December 2021.
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