Oil prices dropped on Wednesday on worries over fuel demand ahead of a U.S. Federal Reserve meeting which is expected to see the central bank to hike rates by at least 75 basis points to combat inflation.
WTI crude futures fell 80 cents, or 0.67%, to $118.16 a barrel.
Surging inflation has led investors and oil traders to brace for a big move by the Fed this week – what could be the largest U.S. interest rate hike in 28 years.
On the demand side, China’s latest COVID outbreak, traced to a 24-hour bar in Beijing, has raised fears of a new phase of lockdowns.
In its monthly report, the Organization of the Petroleum Exporting Countries (OPEC) stuck to its forecast that world oil demand will exceed pre-pandemic levels in 2022, but said Russia’s invasion of Ukraine – Moscow calls is actions a “special operation” – and developments related to the coronavirus pandemic pose a considerable risk.
The producers’ group sees demand growth slowing next year, OPEC delegates and industry sources told Reuters, as surging oil prices help drive up inflation and act as a drag on the global economy.
Still, offering some support to prices is tight supply, which has been aggravated by a drop in exports from Libya amid a political crisis that has hit output and ports.