Oil prices fell on Tuesday amid concerns that keeping interest rates higher for longer by major central banks would constrain demand for the fuel as supplies are expected to be tight.
Brent crude futures were down 87 cents at $92.42 a barrel at 0630 GMT, while West Texas Intermediate (WTI) crude futures were down 87 cents at $88.81 a barrel.
Fears of economic recession may dominate movements in the oil market again due to rising US bond yields following the Fed’s hawkish stance last week.
The world’s leading economic policymakers, the US Federal Reserve and the European Central Bank, have recently reiterated their determination to fight inflation, signaling that the tight policy may continue for longer than previously anticipated.
High-interest rates slow economic growth, which reduces demand for oil.
Separately on Monday, ratings agency Moody’s said a US government shutdown would hurt the country’s credit; This warning came a month after Fitch downgraded the United States by one notch due to the debt ceiling crisis.
Evergrande announced Monday evening that it had missed its bond coupon payment. With this statement causing investors to renew their pessimism about the sector, which has long been an important driver of economic growth, real estate shortages in China also suppress sentiment.
While the supply squeeze continues as Russia and Saudi Arabia extend production cuts until the end of the year, Moscow on Monday eased its temporary ban on gasoline and diesel exports, which was imposed to stabilize the domestic market.
With China’s Golden Week holiday kicking off on Sunday, oil prices could get a boost from a surge in travel and a resulting surge in demand for petroleum products from the world’s second-largest oil consumer.
Oil prices have risen nearly 30 percent since mid-year, mostly due to tight supply, contributing to wiping out 0.5 percentage points of global GDP growth in the second half of this year. However, it would not be correct to say that the shock is large enough to threaten expansion on its own.