Oil plunged the most since early January as U.S. Federal Reserve Chair Jerome Powell’s hawkish testimony to lawmakers drove the commodity down through multiple layers of technical support.
Powell’s message that the central bank may raise rates faster than expected — and to a higher endpoint — bolstered a bear case built on swelling U.S. stockpiles and a weaker-than-expected economic growth target from China. His message broke a five-day rally for West Texas Intermediate and pushed crude below its 50- and 100- day moving averages.
“If the Fed decides that we’re going to strangle inflation until it cries uncle, and by so doing jack up interest rates to the point where there is pain across the economy, that’s not good for GDP,” said Stewart Glickman, deputy director of equity research at CFRA Research. “Oil demand is correlated with GDP, so that would be bad for oil prices.”
Crude has traded in a narrow channel throughout the year as prospects for China’s rising demand and the US’s lackluster consumption keep prices stuck in a narrow band.
Prices:
- WTI for April delivery slipped US$2.88 to settle at US$77.58 a barrel in New York.
- Brent for May settlement fell US$2.89 to settle at US$83.29 a barrel.
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