(Bloomberg) -- Oil held losses near $83 a barrel after the Federal Reserve raised interest rates and signaled more aggressive monetary tightening, raising concerns about the outlook for energy demand.
West Texas Intermediate dipped in early Asian trading after losing almost 2% on Wednesday, with the Fed hike offsetting Russia’s escalation of its flagging invasion of Ukraine. Chair Jerome Powell vowed officials would crush inflation after they raised interest rates by 75 basis points for a third straight time.
The Fed decision will be followed by other central banks in Asia and Europe, which are also expected to raise borrowing costs, adding to bearish headwinds. Oil is on track for its first quarterly loss in more than two years on concerns over a slowdown, while thin liquidity has exacerbated price swings.
An increase of commercial oil inventories in the US put additional pressure on prices. The Energy Information Administration reported stockpiles rose by 1.1 million barrels last week, while supplies expanded at the key storage hub at Cushing, Oklahoma. A measure of diesel demand also tumbled.
“Demand was already being tempered by China’s intermittent lockdowns, while the macroeconomic outlook is deteriorating faster than expected in Europe and high prices are denting US demand,” Citibank analysts wrote in a note dated Sept. 21. Recession concerns are weighing on sentiment, they added.