Oil prices fall on rate hike fears, demand concerns

Around 10am, the November Brent contract on the Intercontinental Exchange was at $91.55 per barrel, down 1.39% from its previous close. The October contract of West Texas Intermediate (WTI) fell 1.6% to $85.40 a barrel.

Ravindra Rao, head of commodity research at Kotak Securities, said, “NYMEX crude trades over 1% lower weighed down by demand concerns amid China’s virus spread. Also weighing on price are increasing efforts to curb prices including cap on Russian oil.”

He, however, noted that supply risks related to Russia and uncertainty about Iran’s nuclear deal have restricted the decline.

“Drop in US crude oil rig count also shows weakening production interest amid correction in price. Crude may remain volatile as supply risks counter demand concerns however with focus on China and central banks, the general bias is still on the downside,” Rao added.

Crude prices have, however, recovered from the seven month low levels hit last week.

Rahul Kalantri, vice president, commodities at Mehta Equities, said, “Crude oil prices exhibited high volatility last week while Brent prices had slipped below $88 per barrel due to demand concerns from China and unexpected increase in the U.S. crude oil inventories although it recovered from its lows after the Russian President threatened to halt energy exports.”

He noted that fresh Covid-19 restrictions in China and aggressive interest rate hikes signal by the US Federal Reserve Chairman pushed oil prices lower. “We expect crude oil prices to remain volatile in today’s session,” Kalantri said.

Despite the recent decline in crude prices, retail fuel prices in India have remained unchanged for nearly four months now.

In the national capital, petrol sold at ₹96.72 a litre, while diesel was priced at ₹89.62 per litre on Monday.

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