Oil ticks down on interest rate hike fears


By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices edged lower on Thursday, as fears that rising interest rates could dent global economic growth and crude demand offset a bigger-than-expected fall in U.S. inventories.

Brent crude futures fell 38 cents, or 0.5%, to $73.66 a barrel by 1127 a.m. ET (1527 GMT). U.S. West Texas Intermediate (WTI) crude futures fell 47 cents, or 0.7%, to $69.09 a barrel.

Both benchmarks gained about 3% on Wednesday after the U.S. Energy Information Administration (EIA) said crude inventories dropped by 9.6 million barrels in the week ended June 23, far exceeding the 1.8-million barrel draw analysts had forecast in a Reuters poll.

Investors were concerned about rising interest rates and economic growth after Federal Reserve Chair Jerome Powell reiterated that he expects the moderate pace of interest rate decisions to continue in the coming months.

The number of Americans filing new claims for unemployment benefits fell last week by the most in 20 months, offering an upbeat picture of the labor market that could see the Federal Reserve continuing to raise interest rates to cool demand.

“Crude traders remain torn between rising interest rates with fears of a global recession against elevated travel demand and shrinking crude supplies,” said Dennis Kissler, senior vice president of trading at BOK Financial.

European Central Bank President Christine Lagarde has also cemented expectations for a ninth consecutive rise in euro zone rates in July.

Financial stability risk in the European Union remains at a “severe” level and the downturn in the housing market could become even more broad-based, she added.

Adding to pressure, annual profits at industrial firms in China, the world’s second-biggest oil consumer, extended a double-digit decline in the first five months as softening demand squeezed margins.

“The lack of prospects for fuel demand growth has limited the gain in oil prices, even with supply curbs by oil producers,” said Tetsu Emori, CEO of Emori Fund Management Inc.

Given falling prices, Saudi Arabia this month pledged to sharply cut its output in July, adding to a broader OPEC+ deal to limit supply into 2024.

(Additional reporting by Ahmad Ghaddar in London,Yuka Obayashi; editing by Jason Neely, David Evans, Barbara Lewis and David Gregorio)

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