Oil headed for a 4% weekly loss on Friday after the Federal Reserve indicated that further interest rate hikes are on the agenda. This comes after the central bank implemented a rate pause in June.
West Texas Intermediate, the U.S. benchmark, slipped below $69 per barrel following a 4.2% slump on Thursday. Fed Chair Jerome Powell’s warning of further monetary tightening in the second half of the year has reduced investors’ willingness to take risks.
The ongoing oil decline comes despite a recent decision by the Organization of Petroleum Exporting Countries and its allies to implement a production cut, aimed at driving up the price of oil.
Even with positive developments such as rising oil supply in the U.S. to its highest level since December, crude continues to fall as well.
“The oil market remains torn between supportive fundamentals and an uncertain macro outlook,” said Warren Patterson, head of commodities strategy at ING Groep NV. Patterson observed that while the Fed’s rate hikes could suppress the market in the short term, this agenda should prove “constructive” over the long term as inflations continue to cool.