Oil extended its losses on Wednesday after falling 5% in the previous session as investors price expectations of rate hikes in the US and Europe and expect clarity on the future policy route.
Brent futures are down 12 cents, or 0.2%, at 0605 GMT to $75.20 a barrel, and West Texas Intermediate crude (WTI) fell 17 cents, or 0.2%, to $71.49.
Both indicators closed at their lowest since March 24, when they recorded their biggest one-day percentage drops since early January in the previous session.
The mood in the oil market continues to be negative. Investors are increasingly concerned about the macro outlook and its effects on oil demand.
The US Federal Reserve is expected to raise interest rates by another 25 basis points on Wednesday to fight inflation, while the European Central Bank is expected to raise interest rates at its regular policy meeting on Thursday. This could slow economic growth and hit energy demand.
A 25 basis point rate hike is already priced in, so the market will focus on how Fed Chairman Jerome Powell will strike a balance between keeping the Fed’s tightening option open and calming nerves around renewed banking tensions.
Regulators seized First Republic Bank and sold its assets to JPMorgan Chase & Co on Monday, in an effort to resolve the largest bankruptcy in the United States since the 2008 financial crisis.
Australia’s central bank stunned markets by raising the cash rate on Tuesday, warning that further tightening may be needed to combat high inflation.
Meanwhile, concerns over diesel demand in recent months have pushed US heating fuel futures to their lowest levels since December 2021.
Energy prices are under pressure after China, the world’s largest energy consumer and the largest buyer of crude oil, showed that manufacturing activity unexpectedly fell in April over the weekend.
The International Monetary Fund (IMF) raised its economic forecast for the region on Tuesday, saying reopening the Chinese economy would be crucial for Asia. But it warned of risks from persistent inflation and global market volatility driven by Western banking-sector woes.
Meanwhile, US crude inventories fell 3.9 million barrels last week for the third week in a row for the first time since December, according to figures from the American Petroleum Institute (API) on Tuesday.
Official oil stock data from the U.S. Energy Information Administration (EIA) will be released at 14:30 GMT on Wednesday.
A survey found that OPEC oil production fell by 190,000 barrels per day in April, mainly due to the impact of Iraq and Nigeria. Production is expected to drop further in May as a new round of voluntary cutbacks announced on April 2 comes into effect.