Oil quotes are falling on Friday. Amid tightening monetary policy of the world's leading economies, expectations of a strong slowdown in economic growth, which risks leading to a significant drop in fuel demand, have intensified. In light of these rather bleak prospects, oil ends the week in the red for the first time since April.
August futures for Brent crude on London's ICE Futures exchange traded on Friday morning at $119.2 per barrel, which is 0.51% lower than the price of the previous trading day. In the afternoon, quotes were at $119.3.
Futures for WTI oil for July in electronic trading on the New York Mercantile Exchange amounted to $116.9 per barrel by this time, which is 0.46% lower than the final value of the previous session. By the time the review was published, they had already dropped to $114.31.
The US central bank raised the bank rate on Wednesday by 75 basis points at once, which happened for the first time since 1994. Federal Reserve Chairman Jerome Powell said that the central bank intends to bring the rate to such a level as to significantly limit economic activity and, as a result, weaken the inflation that has played out.
In addition, Fed officials said that another rate hike is planned before the end of this year. This is likely to be enough to noticeably slow economic growth in the coming months and increase unemployment in the US.
However, not only the US central bank risked a significant tightening of monetary policy. The central banks of Great Britain and Switzerland also raised their bank rates the day before. The Bank of England increased it by 25 basis points to 1.25%. The Swiss National Bank at the same time cut the negative rate on deposits in the country by 50 basis points, to 0.25%.
A significant increase in rates in light of rising inflation in developed countries will lead to the fact that investors will avoid risky transactions. Statistics on the US economy, which were released on Thursday, confirmed the deteriorating economic situation in the country. Thus, the real estate sector began to experience some difficulties: the volume of houses under construction fell in May by 14%, to 1.55 million objects, which indicates a significant drop in demand. The number of initial applications for unemployment benefits amounted to 229,000, exceeding the figures for March for the second consecutive week.
It should be admitted that the obvious negative about the US economic situation led to a rollback of dollar rates and the dollar, which allowed Brent quotes to win back intraday losses by the evening and show an increase of 1.3%, returning to $120 per barrel.
Brent oil was under some pressure on Friday. Despite the prevailing negativity on the markets, there are no significant reasons for a further rollback in the cost of oil. Given the strong demand for fuel and the continuing imbalance in supplies, a resumption of growth towards the peaks of the year is possible as early as next week.