Saturday 10 December 2022
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EconomyOil prices drop internationally: Here's the geopolitical reason

Oil prices drop internationally: Here’s the geopolitical reason

Oil prices today dropped, following the head of the United States Federal Reserve warning of tightening monetary policy, noting that there is no quick cure for inflation, even as talk of a hefty European Central Bank rate hike managed to stoke demand worries.

United States Federal Reserve Chair Jerome Powell said that the US economy would need tight monetary policy "for some " before inflation came under control, a fact that implies slower growth, a weaker job market and "some pain" for households and businesses. Following these remarks, according to a Reuters report, oil futures and Wall Street's main stock indexes reportedly witnessed a drop.

According to Phil Flynn, an analyst at Futures Group in Chicago, “the market is taking (Powell) at his word. The stock market has given up its gains and I think oil was very concerned about it." Brent crude futures declined 51 cents to $ 98.83 a barrel by 11:01 a.m. EDT (1501 GMT). The Reuters report said that the US West Texas Intermediate (WTI) crude futures had fallen 86 cents to $ 91.66 a barrel.

Meanwhile, earlier in the session, both contracts had risen by over $ 1, supported by strong US economic data a day earlier, while overall, Brent was on track for a weekly gain of around 2.2%, while WTI was set to rise 0.8%, the report said.

Some European Central Bank policymakers want to discuss a 75 basis point rate hike at a Sept. 8 policy meeting, even if recession risks loom, as the inflation outlook is deteriorating, five sources with direct knowledge of the process told Reuters. losses were limited as OPEC's de facto Saudi Arabia last Monday flagged the possibility of production cuts to offset the return of Iranian barrels to oil markets, should Tehran clinch a nuclear deal with the West, the report said.

Today, the United Arab Emirates became the latest OPEC+ member to state it is aligned with Saudi Arabia's thinking on crude markets, a source with knowledge of the matter told Reuters. "The impression remains that Saudi Arabia is not willing to tolerate any slide below $ 90. Speculators could view this as an invitation to bet on further price rises without the need to fear any more pronounced price declines," Commerzbank said in a note.

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Reuters is an international news organization owned by Thomson Reuters. It employs some 2,500 journalists and 600 photojournalists in about 200 locations worldwide. The agency was established in London in 1851 by the German-born Paul Reuter. It was acquired by the Thomson Corporation in 2008 and now makes up the media division of Thomson Reuters.


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