“Sentiment in the oil market remains negative,” ING analysts Warren Patterson and Ewa Manthe said in a note to clients. “Investors appear to be increasingly concerned about the global outlook and its implications for oil demand.”
Market movements
Brent crude futures fell $1.7, or 2.36%, to $75.28 a barrel at 0845 GMT, while Nymex crude fell $1.69, or 2, 34%, to $69.91 a barrel, according to Reuters data.
Both benchmarks closed at their lowest levels since March 24 in the previous session, during which they also recorded the largest one-day percentage decline since early January this year.
The US Federal Reserve is expected to raise interest rates by 25 basis points on Wednesday to rein in inflation, and the European Central Bank is also expected to raise rates at its regular meeting on Thursday.
Further rate hikes could slow economic growth and undermine energy demand.
The 25 basis point rate hike is fully priced in, so the focus will be on how Fed Chairman Jerome Powell balances maintaining the Fed’s tightening option and easing headwinds. concerns about turmoil in the US banking sector,” said Yip John Rong, market analyst at IG brokerage Note.
On Monday, California federal regulators seized First Republic Bank and sold its assets to JPMorgan Chase, part of a deal to resolve the biggest US banking meltdown since the 2008 global financial crisis and end banking turmoil in progress.
With assets of $233 billion at the end of March, the First Republic is the second largest failed bank in US history – excluding investment banks such as Lehman Brothers – after the Washington bankruptcy. Mutual in 2008.
In Australia, the central bank surprised markets by raising its interest rate by a quarter of a percentage point on Tuesday and warned that further tightening may be needed to combat soaring inflation.
Meanwhile, concerns over diesel demand in recent months have pushed U.S. HOc1 heating oil futures to their lowest level since December 2021.
Energy prices are also under pressure after data out of China over the weekend showed manufacturing activity unexpectedly fell in April. China is the world’s biggest consumer of energy and the biggest buyer of crude oil.
The International Monetary Fund said reopening China’s economy would be key for Asia as it raised its economic outlook for the region on Tuesday. But she warned of the risks of continued inflation and volatility in global markets brought about by problems in the Western banking sector.
By contrast, U.S. crude inventories fell for the third straight week for the first time since December, down about 3.9 million barrels last week, according to figures released Tuesday by the American Petroleum Institute.
Official inventory data from the US Energy Information Administration is expected at 10:30 a.m. EST Wednesday.
A Reuters survey found that OPEC oil production fell by 190,000 barrels a day in April, mainly due to Iraq and Nigeria. Production is expected to fall further in May as a new round of voluntary cuts, revealed on April 2, come into effect.
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