Demand-Fixated Traders Cause More Losses For Oil As Fed Stokes Worries

Meanwhile, China stock market plunge adds to bearish sentiment: File Image/Pixabay

Crude traders on Monday proved that they could not shake  their near-obsessive worries over interest rate hikes, nor could they ignore the lingering effects of the Energy Information Administration reporting last week that U.S. crude stockpiles rose to their highest since May 2021.

Brent settled down 71 cents, or 0.9 percent, at $82.45 per barrel, while West Texas Intermediate settled down 64 cents, or 0.8 percent, at $75.68.

Trioggering the latest round of losses were new orders for key U.S. manufactured capital goods increasing more than anticipated in January while shipments rebounded, all of which suggested that business spending on equipment picked up at the start of the first quarter.

But shares overall remained near six-week lows as expectations for interest rate hikes in the U.S. and Europe intensified, stoked by U.S. Fed governor Philip Jefferson stating that inflation for services in his country was "stubbornly high."

By contrast, traders shrugged off news on Monday that Poland's largest oil company, PKN Orlen SA, unexpectedly stopped receiving crude via the Druzhba pipeline from Russia, and this caused Ed Moya, a senior market analyst at Oanda, to remark,  "Energy traders are fixated with the crude demand outlook and that is why the halting of a Russian pipeline to Poland is not sending prices higher."

Also influencing trading to the negative on Monday was a steep drop in China's stock markets sparking concern about the economic health of the world's biggest energy consumer.

Chinese stocks plummeted more than 8 percent in Asian trading, the biggest one-day drop in eight years that also drove European equities markets to a two-week low.

However, Carl Larry, director of business development for oil and gas at Frost & Sullivan, chose to regard Monday's trading influences in a positive light: he said, "Brent's still seeing support above $50 and U.S. crude is staying above $45; there's a lot of hedging going on at those levels."