Oil fell the most in more than a year as early signs that demand is flagging exacerbated market jitters at the prospect of a punishing stretch of high interest rates.
West Texas Intermediate fell 5.6% to below $85 a barrel, the biggest one-day drop since September 2022. Despite signs of a tight market today, the prospect of more supplies in the future as well as technical selling and algorithm driven traders. rush to get out, pushed the price down to a complete rout.
After rallying around 40% from mid-June to late September, crude oil has reversed course in the past week amid a drumbeat of comments that the rise was overblown. The pullback comes amid growing anxiety over interest rates and the economy that has rocked equity and bond markets in recent weeks.
“It’s clear that the outlook for global growth will take a big hit over the coming year, which will spell trouble for the outlook for crude oil demand,” said Ed Moya, senior markets analyst at Oanda. “Energy traders quickly realized that the path to $100 oil is not quite there.”
Both WTI and global benchmark Brent have fallen below their 50-day moving averages, a bearish technical signal. Gasoline futures also plunged 6% to $2.22 a gallon after data showed demand for the fuel fell to the lowest seasonal level in 25 years, pointing to economic growth slower
Meanwhile, inventories at the largest U.S. storage center in Cushing, Okla., rose for the first time in eight weeks. Still, inventories across the country continued to fall to the lowest level since December 2022, and a key North American pipeline also saw lower flows this week.
Earlier, OPEC leaders + Saudi Arabia and Russia pledged to maintain production curbs of more than 1 million barrels per day until the end of the year. Those supply cuts had spurred the recent recovery, tightening the market, reducing inventories and increasing competition for fast barrels.
But recent sessions have seen investors worried that the Federal Reserve isn’t done raising interest rates, strengthening the dollar, making commodities more expensive for most buyers. Big gains in US Treasury yields have also hurt commodities.
Prices:
- WTI for November delivery lost $5.01 to settle at $84.22 a barrel in New York.
- Brent for December settlement fell $5.11 to $85.81 a barrel.
