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Oil futures fell Friday, with benchmarks on track for their biggest weekly drops since early February, after Federal Reserve Chair Jerome Powell this week said interest rates would need to rise further than previously anticipated to get inflation under control.
Price action
-
West Texas Intermediate crude for April delivery
CL.1,
-0.67% CLJ23,
-0.67%
fell 62 cents, or 0.8%, to $75.10 a barrel on the New York Mercantile Exchange, on track for a 5.8% weekly fall. -
May Brent crude
BRN00,
-0.51% BRNK23,
-0.51% ,
the global benchmark, was off 50 cents, or 0.6%, at $81.09 a barrel on ICE Futures Europe, leaving it down 5.5% so far this week. -
Back on Nymex, April gasoline
RBJ23,
-0.33%
fell 0.6% to $2.59 a gallon, while April heating oil
HOJ23,
+0.40%
was off 0.6% at $2.654 a gallon. -
April natural gas
NGJ23,
-1.85%
dropped 1.7% to $2.50 per million British thermal units.
Market drivers
Both WTI and Brent were headed for their biggest weekly declines since the week ended Feb. 3. The tone was set by Powell, who in testimony before the Senate on Tuesday warned that interest rates would need to rise further than previously thought to get inflation under control, while also leaving the door open to an outsize half percentage point rate hike when policy makers meet later in March.
Powell, appearing before a House panel Wednesday, reiterated that no decision had yet been made on the size of a March hike, emphasizing the importance of coming data releases. That’s put emphasis on Friday’s release of the February jobs report, which will be watched for signs of any cooling in the labor market after the January report showed a blockbuster 517,000 jump in payrolls.
Jerome Powell’s stance was very hawkish and the markets are now pricing in steeper rate hikes, and also a higher terminal rate, which could reach 6%,” said Ricardo Evangelista, senior analyst at ActivTrades, in emailed comments.
“As a result, the chances of a recession — and therefore lower oil demand — increased causing a drop in the price of the barrel as traders start to price in the economic contraction, that may result from the tightening of monetary policy in the United States,” he wrote.
