Oil prices fell about 1% to a near two-week low in volatile trade on Sept. 21 after the U.S. Federal Reserve delivered another hefty rate hike to quell inflation that could reduce economic activity and demand for oil.
The Fed raised its target interest rate by 75 basis points for the third time to a 3-3.25% range and signaled more large increases to come. Risk assets like stocks and oil fell on the news, while the dollar rallied.
Brent crude futures settled 79 cents, or 0.9%, lower at $89.83/bbl, its lowest close since Sept. 8, while WTI crude in the U.S. fell $1, or 1.2%, to $82.94, its lowest close since Sept. 7.
Earlier in the session, oil gained over $2/bbl on worries about a Russian troop mobilization before dropping over $1 on a strong U.S. dollar and lower U.S. gasoline demand.
U.S. gasoline demand over the past four weeks fell to 8.5 million bbl/d, its lowest since February, according to the U.S. Energy Information Administration (EIA).
“The stand-out data point is the continuing weakness in gasoline demand. It’s really what’s been haunting this market,” said John Kilduff, partner at Again Capital LLC in New York.
The EIA reported a 1.1 million-barrel increase in crude stocks last week, half the build analysts forecast in a Reuters poll.
Russian President Vladimir Putin called up 300,000 reservists to fight in Ukraine and backed a plan to annex parts of the country, hinting he was prepared to use nuclear weapons.
U.S. President Joe Biden accused Russia of making “reckless” and “irresponsible” threats to use nuclear weapons.
Oil prices soared to a multiyear high in March after the Ukraine war broke out. EU sanctions banning seaborne imports of Russian crude will come into force on Dec. 5.
“Much of today’s downside appeared related to strength in the U.S. dollar and we still view near-term U.S. dollar direction as a critical component in assessing near-term oil price direction,” analysts at energy consulting firm Ritterbusch and Associates said.
The dollar was on track for its highest close in over 20 years against a basket of other currencies, making oil more expensive for buyers using other currencies.
Signs of a recovery in Chinese demand gave prices a lift early in the session.
In the U.S., however, the economic news was not so good. Existing home sales dropped for the seventh straight month in August as affordability deteriorated further amid surging mortgage rates.
In Europe, “government are increasingly intervening in energy markets in an attempt to stave off economic crisis,” analysts at energy consulting firm EBW Analytics said in a note.
Germany agreed to nationalize natural gas company Uniper SE, while the British government said it would cap wholesale electricity and gas costs for businesses.
Recommended Reading
E&P Highlights: Aug. 26, 2024
2024-08-26 - Here’s a roundup of the latest E&P headlines, with Ovintiv considering selling its Uinta assets and drilling operations beginning at the Anchois project offshore Morocco.
E&P Highlights: Sept. 16, 2024
2024-09-16 - Here’s a roundup of the latest E&P headlines, with an update on Hurricane Francine and a major contract between Saipem and QatarEnergy.
Private Equity Looks for Minerals Exit
2024-07-26 - Private equity firms have become adroit at finding the best mineral and royalties acreage; the trick is to get public markets to pay more attention.
Baytex Energy Joins Eagle Ford Shale’s Refrac Rally
2024-07-28 - Canadian operator Baytex Energy joins a growing number of E&Ps touting refrac projects in the Eagle Ford Shale.
EOG Resources Wildcatting Pearsall in Western Eagle Ford Stepout
2024-07-17 - EOG Resources spud the well June 25 in Burns Ranch with rights to the Pearsall well about 4,000 ft below the Eagle Ford, according to myriad sources.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.