Oil prices fell in early trade on Tuesday due to worries that fuel demand will be hampered by major central banks maintaining higher interest rates for a longer period of time, even if supply is anticipated to be constrained. U.S. West Texas Intermediate crude futures were trading 1 cent lower at $89.67 while Brent crude futures were down 11 cents at $93.18 per barrel.
The U.S. Federal Reserve and the European Central Bank, the two institutions in charge of setting global economic policy, have recently reaffirmed their commitment to fighting inflation, suggesting that restrictive monetary policy may last longer than initially thought. Lower economic growth caused by higher interest rates reduces demand for oil.
Moscow on Monday loosened its temporary restriction on petrol and diesel exports, issued separately to stabilize the domestic market, despite supplies remaining constrained due to Russia and Saudi Arabia extending output cutbacks through the end of the year.
Oil prices may rise as travel picks up and demand for oil products increases in China, the world’s second-largest oil consumer, with the start of the Golden Week holiday on Sunday. Oil supply constraints may be stronger than macroeconomic challenges. According to ANZ Research, we anticipate that oil will trade above $90 per barrel this week.
