Oil capped its longest streak of daily losses this year as hawkish signals from Federal Reserve officials heightened fears of an excess of crude piling up in storage.
Oil prices were negatively affected this week due to the large increase in US crude stockpiles and the general risk aversion that resulted from the possibility of the Federal Reserve continuing to raise interest rates. The impact of these headwinds has been compounded by the federal government’s determination to continue drawing from the country’s Strategic Petroleum Reserve, with an additional 26 million barrels set to come to market.
Oil prices have been stuck in a narrow range since early December. This is because the expectations of a recovery in global demand as a result of China stopping the closures related to the Covid-19 virus are offset by the risks of a recession in the US economy under the weight of the Federal Reserve raising interest rates.
US interest rates may go to a higher level than Wall Street and the Fed expect
Goldman Sachs Group analysts led by Jeff Currie wrote in a note to clients: “The continuation of oil trading in a specific range is causing investors to be wary in the market, and the growing need for more evidence related to the economic cycle to invest in the possibility of a structural rise in crude prices.”
