Oil stabilizes after rate hike worries triggered sell-off

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Oil prices stabilized after early losses on Wednesday, driven by fears that a more aggressive U.S. interest rate hike would hurt demand, as the market waited for greater clarity on inventories.

At 1103 GMT, futures Brent crude They rose 11 cents, or 0.1 percent, to $83.40 a barrel, and those of the West Texas Intermediate in the United States (WTI) they were down 9 cents, or 0.1%, at $77.49.

Both Brent and WTI fell more than 3% on Tuesday after Federal Reserve Chairman Jerome Powell said the bank will likely have to raise interest rates more than expected in response to recent solid data.

“Fed chief Powell’s comments about higher rates for longer spooked markets and caused risky assets, including commodities, to fall sharply overnight,” said Tina Teng, an analyst at CMC Markets.

The strong dollar also constrained oil prices. Powell’s comments prompted the greenback, which normally trades inversely to crude, hit a three-month high against a basket of currencies.

Barclays (LON:BARCIt lowered its 2023 forecast for Brent by $6 to $92 a barrel and WTI by $7 to $87, “mainly due to stronger-than-expected Russian supplies,” the bank said.

“We expect the continued recovery in civil aviation demand in China and neighboring countries, stabilisation of industrial activity and slower non-OPEC+ supply growth to bring the oil market balance to a deficit by the end of this year,” he added.

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