Oil prices dropped nearly $2 a barrel on Thursday as fresh worries emerged that the interest rate hikes in the United States would slow economic growth.
Brent crude futures settled at $110.05 a barrel after falling by $1.69 or 1.5 per cent and the U.S. West Texas Intermediate (WTI) crude futures settled at $104.27 a barrel after it dropped $1.92 or 1.8 per cent.
After another round of remarks from Federal Reserve Chair, Mr Jerome Powell, the market was thrown into a fresh bout of worries.
Mr Powell said the Fed’s focus on curbing inflation was “unconditional” and the labour market was unsustainably strong, comments that stoked fears of more rate hikes.
The market has been jittery since the US Federal Reserve raised its key interest rate by 0.75 per cent, the biggest hike since 1994. This was followed by top economies like the United Kingdom and Switzerland, thus feeding worries about global economic growth.
The most recent estimates by the American Petroleum Institute, according to market sources, showed US crude and gasoline inventories rising last week and this weighed on prices.
Official weekly estimates for US oil inventories were scheduled to be released on Thursday but technical problems will delay those figures until next week, the US Energy Information Administration (EIA) said, without giving a specific timeline.
With much of the market’s focus on the US, President Joe Biden asked Congress on Wednesday to lift the federal fuel tax for three months in a bid to reduce excessively high prices at the pump.
However, there is evidence to support that the bid may not happen as it met scrutiny from lawmakers including those from the President’s own party.
In a four-point plan, Mr Biden told legislators to consider suspending the $0.24 federal tax per gallon of diesel and the $0.18 per gallon tax on petroleum (called gasoline) for 90 days and recommended that states also lift their state taxes on fuels.
The President also called on oil companies to use their profits to boost refining capacity and on fuel retailers to pass on the reduction in prices resulting from the potential lifting of federal taxes to customers.
US oil producers have been reluctant to boost production, prioritizing instead the return of cash to shareholders.
On the supply end of the market, the Organisation of the Petroleum Exporting Countries (OPEC) and allied producing countries including Russia will likely stick to a plan for accelerated output increases in August in hopes of easing crude prices and inflation.
The group known as OPEC+ agreed at its last meeting on June 2 to boost output by 648,000 barrels a day in July, or 7 per cent of global demand, and by the same amount in August, up from the initial plan to add 432,000 barrels per day a month over three months until September.