Oil Dips As Fed Fears Once Again Grip Traders

Meanwhile, CitiGroup takes a wait-and-see approach to China's recovery: File Image/Pixabay

Oil traders on Monday resumed worrying about further interest rate hikes possibly ruining demand, causing the commodity after three weeks of gains to post a modest decline – and what some think is the start of a downward trend.

Brent settled down 96 cents, or 0.2 percent, at $84.58 per barrel while West Texas Intermediate settled down 94 cents, or 0.1 percent, to $79.74.

The fears of another hike were stoked by news that the U.S. unemployment rate had returned to a low 3.5 percent, indicating labour market resilience that could inspire the Fed to take action next month.

Nick Bunker, head of economic research at the Indeed Hiring Lab, said, "Rather than an abrupt and jarring end to the jobs party of the past couple of years, the nation's job market is instead gradually turning the lights back up and music down in a mostly smooth transition from weekend to weekday that looks, for now, to be largely sustainable and healthy."

As for how oil trading might unfold this week, Jim Ritterbusch, president of Ritterbusch and Associates, speculated that it will "be heavily influenced by inflation data featured by Wednesday's CPI and Thursday's PPI that will likely revive the specter of higher interest rates that could strengthen the U.S. dollar."

For its part, CitiGroup saw oil falling over the longer term below $80 per barrel even with the Organization of Petroleum Exporting Countries (OPEC) and its allies agreeing earlier this month to cut output (a move that caused prices to surge into what some analysts thought was overbought territory).

Ed Morse, global head of commodities research at CitiGroup, also said with regard to China's post-Covid lockdown economic revival, "We're waiting to see what's really happening with the economy, but it is a slower recovery; if anything, that will be an end-of-year phenomenon."