The price of oil suffered a dramatic fall on demand fears, with benchmark Brent crude dropping 3.2% to $92 per barrel.
The move comes on the heels of the US Federal Reserve’s hawkish interest rates stance, with the latest positive jobs report adding fuel to the fire for Fed chair Jerome Powell to hike rates to prompt a softening in the jobs market.
US inflation currently stands at 8.5%, representing a decline from its 9.1% figure the previous month. However, the one-month drop provided little incentive for Powell to change course, with the chair confirming his intention to continue rate hikes until inflation fell far closer to the organisation’s 2% target level at last month’s Jackson Hole convention.
Meanwhile, continued lockdowns in Chinese city Chengdu and tech hub Shenzhen prompted increased demand fears, as the country’s zero-Covid policy continued to see its production hubs shut down for extended periods.
The OPEC+ decision to roll back its September production rise of 100,000 bdp on Monday did little to stop prices falling, after the cartel cited market price volatility as its motive to cut production, although its minor alteration was essentially symbolic in nature, representing approximately 0.1% of total international demand.
“The OPEC+ news is now in the market and the focus has temporarily shifted to economic and inflationary concerns amongst which the two relevant factors are the extended COVID lockdowns in China and Thursday’s ECB rate decision,” said oil broker PVM representative Tamas Varga.
“Undoubtedly, they raise fears of demand destruction.”
