(Reuters) – Oil prices edged lower on Thursday as the market digested the higher likelihood of a U.S. rate hike accelerating fears of global economic slowdown against tighter crude supply.
Brent crude futures were down 66 to $75.99 a barrel by 1352 GMT after a 0.5% gain the previous day.
U.S. West Texas Intermediate crude was 57 cents down to $71.22 after rising 2.9% in post-holiday trade on Wednesday to catch up with Brent’s gains earlier in the week.
The market has been expecting interest rates in the U.S. and Europe to rise further to tame stubbornly high inflation, while fears of a global recession have been heightened by recent surveys showing that factory and services activity in China and Europe has slowed.
Minutes released on Wednesday showed that a united U.S. central bank agreed to hold rates steady at its June meeting to buy time and assess the need for further hikes, even though most attendees expected they would eventually need to tighten policy further.
U.S. interest rate futures on Thursday added to the grim sentiment, increasing the probability of another U.S. rate rise after news private payrolls surged last month.
“If a rate hike this month wasn’t already nailed on, it probably is now,” said OANDA senior market analyst Craig Erlam.
On the supply side, top oil exporters Saudi Arabia and Russia announced a fresh round of output cuts for August. The total cuts now stand at more than five million barrels per day (bpd), equating to 5% of global oil output.
The cuts, along with a bigger than expected drop in U.S. crude stocks, provided some support for prices.
OPEC is likely to maintain an upbeat view on oil demand growth for next year when it publishes its first outlook for 2024 this month, predicting a slowdown from this year but still an above-average increase, sources close to OPEC told Reuters.
OPEC ministers and executives from oil companies told a two-day conference in Vienna that governments needed to turn their attention from supply to demand.
Rather than pressuring oil producers to curb supply, which heads of global energy companies say serves only to increase prices, governments should shift the focus to limiting oil demand to reduce emissions, they said.
