Oil falls as interest rate hikes, default fears damp sentiment
BNN Bloomberg
Oil edged lower as the prospect of additional rate hikes from the Federal Reserve increased concerns that the U.S. is headed for a recession that would weaken demand.
West Texas Intermediate traded near US$72 a barrel and has largely followed broader market sentiment away from risk assets. Dallas Fed President Lorie Logan’s comments that the case for a pause next month isn’t clear are raising expectations of an economic slowdown. Also looming over sentiment are the negotiations to increase the U.S. government’s spending limit and avoid a catastrophic default.
“Increased probability of a Fed rate hike in June and a stronger dollar are weighing on the macro tape and dragging crude with it,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “The reality is if you want trade crude right now, you should spend 80 per cent of your time analyzing macro events and 20 per cent of your time analyzing fundamentals.”