Oil falls nearly 3% on Fed rate worries

News of growth in US services industry activity caused oil, stocks to pare gains

NEW YORK:

Oil prices fell nearly 3% on Monday, following US stock markets lower, after US service sector data raised worries that the Federal Reserve could continue its aggressive policy tightening path.

Brent crude futures were down $2.18, or 2.6%, at $83.39 a barrel by 1823 GMT. West Texas Intermediate crude (WTI) fell $2.28, or 2.9%, to $77.70 a barrel. Both benchmarks had earlier risen more than $2, reversing direction.

WTI’s front-month contract began trading lower than prices in half a year, a market structure called contango, which implies oversupply.

US services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy as it braces for an anticipated recession next year.

The news caused oil and stock markets to pare gains.

The data challenges hopes that the Fed might slow the pace and intensity of its rate hikes amid recent signs of ebbing inflation.

“Macro-economic jitters about the Fed and what they’re going to do on interest rates are taking over the market,” said Phil Flynn, an analyst at Price Futures group.

Published in The Express Tribune, December 6^th, 2022.

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