Oil is lower in the face of a potentially large interest rate increase in the US

Pump jacks pump oil at an oil field off the coast of the Caspian Sea in Baku, Azerbaijan, October 5, 2017. REUTERS / Grigory Dukor

NEW YORK, July 14 (Reuters) – Oil prices fell on Thursday, but reduced almost all losses after falling more than $ 4 earlier in the session as investors focused on the prospect of a large US rate hike later this month that could dampen inflation, but at the same time hit oil demand.

Brent oil futures for September fell 47 cents, or 0.5% to $ 99.10 a barrel, ending a third consecutive session below $ 100.

US West Texas Intermediate oil for delivery in August fell $ 95.78 a barrel, or 0.5%, down 52 cents.

Both contracts reached their lowest level on Thursday, February 23, the day before Russia invaded Ukraine, with Brent reaching its lowest level since February 21.

The US Federal Reserve is stepping up its fight with 40-year high inflation with an oversized interest rate hike of 100 basis points this month after a gloomy inflation report showed that price pressure was accelerating. The Fed’s political meeting is scheduled for 26-27. July.

The Fed rate hike is expected to follow a similar move by the Bank of Canada, which surprised the market on Wednesday.

“Measures from the Fed will have an oversized impact on the market when we see them try to digest new economic data on inflation,” said John Kilduff, partner at Again Capital LLC in New York.

Oil prices have fallen over the past two weeks due to recession concerns despite a drop in exports of crude oil and refined products from Russia due to Western sanctions and supply disruptions in Libya. read more

Investors also flocked to the dollar, often seen as a safe haven. The dollar index reached a 20-year high on Wednesday, making oil purchases more expensive for non-US buyers, but withdrew somewhat on Thursday.

“Technical indicators suggest a new round of fresh lows as the US dollar continues to control oil prices,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

In Europe, the signals were also bearish for demand, as the European Commission cut its economic growth forecast and increased the expected inflation rate to 7.6%. read more

Concerns about COVID-19 curbs in several Chinese cities to curb new cases of a highly contagious subvariant have also kept oil prices cap.

China’s daily imports of crude oil in June fell to its lowest level since July 2018, when refineries expected shutdown measures to curb demand, customs data showed on Wednesday.

Data from the US Energy Information Administration also point to declining demand, with product deliveries falling to 18.7 million barrels per day, the lowest since June 2021. Crude oil inventories rose, strengthened by another major release from strategic reserves. read more

US President Joe Biden will fly to Saudi Arabia on Friday, where he will attend a summit of Gulf allies and urge them to pump more oil.

However, spare capacity in the Organization of the Petroleum Exporting Countries is running low, with most producers pumping at maximum capacity, and it is unclear how much extra Saudi Arabia can bring into the market quickly. read more

Reporting by Laura Sanicola in New York Further reporting by Julia Payne in London and Florence Tan in Singapore Editing by Jason Neely, Matthew Lewis and Diane Craft

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