Oil slumps nearly 3% as investors eye U.S. Fed rate hikes

A sticker shows crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, US Nov. 22, 2019. Photo taken Nov. 22, 2019. REUTERS/Angus Mordant/

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  • Powell says Fed is ‘strongly committed’ to curbing inflation
  • Biden calls for federal gasoline tax to be suspended
  • Biden is expected to speak at 1800 GMT

NEW YORK, June 22 (Reuters) – Oil prices fell about 3% on Wednesday as investors worried that Federal Reserve rate hikes could push the US economy into recession, slowing demand for fuel.

Brent crude futures were down $2.95, or 2.6%, to $111.70 a barrel at 12:43 PM EDT (1643 GMT). It hit a session low of $107.03 a barrel, the lowest since May 19.

US West Texas Intermediate (WTI) fell $3.15 or 2.9% to $106.37 a barrel. The session’s low was $101.53 a barrel, the lowest since May 11.

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Investors on Wednesday assessed how rate hikes designed to cool rising inflation could slow an economic recovery. read more

Oil prices eased losses during the session after Fed Chair Jerome Powell pledged an “overarching focus” on curbing inflation and reiterated that continued hikes in the central bank’s key rate would be appropriate, with the pace depending of the economic outlook.

“Powell seemed to change the mood in the market by having confidence in the US economy,” said Phil Flynn, an analyst at Price Futures. “His words have calmed the market and set a short-term bottom.”

Meanwhile, U.S. President Joe Biden is expected to ask Congress to consider a three-month suspension of the federal tax of 18.4 cents per gallon on gasoline and call on states to suspend their fuel taxes, a senior executive said. government official. read more

While lower pump prices could boost fuel demand and support crude oil prices, PVM analyst Stephen Brennock said traders could worry the Biden administration could take further steps to curb high energy prices. to cool.

Lawmakers from both major parties have expressed opposition to suspending the federal gasoline tax, which Biden was expected to announce at 2 p.m. EDT (1800 GMT).

The White House has invited the top executives of seven oil companies to a meeting this week to discuss ways to increase production capacity and lower gasoline prices by about $5 a gallon as they make record profits.

Chevron (CVX.N) CEO Michael Wirth said criticizing the oil industry was not the way to cut fuel prices and the government should change its approach. Biden replied that he was unaware that oil executives “could be hurt so easily.” read more

Global supply is still expected to lag behind demand growth, as indicated this week by trade giant Vitol and Exxon Mobil Corp (XOM.N). read more

The $2.4 trillion invested in energy this year includes record renewable energy spending but falls short to close a supply gap and tackle climate change, according to the International Energy Agency. read more

U.S. oil refining capacity fell for the second year in a row in 2021, government data shows. read more

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Reporting by Stephanie Kelly; additional reporting by Shadia Nasralla, Sonali Paul and Mohi Natayan; Editing by Marguerita Choy and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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