Oil falls on fears of an economic slowdown and a stronger dollar

Oil pumping cranes at the Vaca Muerta oil and shale gas field in the Patagonian province of Neuquén, Argentina, Jan. 21, 2019. REUTERS/Agustin Markarian

Oil prices fell on Monday, ending three days of gains, as investors worried that violent increases in US interest rates will weaken the global economy and reduce demand for fuel, while a stronger dollar also increases pressure.

Brent crude futures for October settlement fell $1.58, or 1.6 percent, to $95.14 a barrel by 0640 GMT.

US West Texas Intermediate crude futures for September delivery, which are due to expire on Monday, fell $1.70, or 1.9 percent, to $89.07 a barrel. The most active October contract was at $88.92, down $1.52, or 1.7%.

Brent and West Texas Intermediate both rose for a third day in a row on Friday, but fell about 1.5% for the week on stronger dollar and demand fears.

“Rising concerns about the global economic slowdown are behind the decline in oil markets,” said Tatsufumi Okoshi, chief economist at Nomura Securities.

“The rise in the dollar also led to new selling,” he said.

The dollar index rose to a five-week high on Monday after Richmond Fed President Thomas Barkin said the “impulse” among central bankers was toward faster rate increases. Read more

A stronger dollar makes oil more expensive for buyers in other currencies.

Investors will be paying close attention to Federal Reserve Chairman Jerome Powell’s comments when he addresses the annual conference of global central banks in Jackson Hole, Wyoming, on Friday.

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The Fed is seen as having more room to raise interest rates than central banks in other large, more fragile economies.

Prices also fell on fears of slowing fuel demand in China, the world’s largest oil importer, due to the energy crisis in the southwest due to the heat wave.

“China’s energy restriction in some regions is also a concern as it may affect economic activity,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Financial news service Caixin said southwest China’s Sichuan Province will extend restrictions on industrial power consumers until August 25 as it tries to deal with dwindling hydropower production and surging household electricity demand after a prolonged heat wave. Read more

In a sign of public concern about the Chinese economy, Beijing lowered its benchmark lending rate and lowered the mortgage reference by a larger margin on Monday, adding to the easing measures taken last week, to revive an economy stymied by the real estate crisis and the COVID recovery. cases. Read more

Meanwhile, the White House said Sunday that the leaders of the United States, Britain, France and Germany discussed efforts to revive the 2015 Iran nuclear deal, though no further details were provided. Read more

(Reporting by Yuka Obayashi) Editing by Jimmy Freed and Christian Schmolinger

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