Oil slumps on fear of economic slowdown, stronger dollar

Oil pump jacks are seen at the Vaca Muerta shale oil and gas storage facility in the Patagonian province of Neuquen, Argentina, Jan. 21, 2019. REUTERS/Agustin Marcarian

TOKYO, Aug. 22 (Reuters) – Oil prices slumped Monday, ending with three days of gains as investors feared aggressive rate hikes in the US would weaken the global economy and dent fuel demand, while a strengthening dollar also hurt the economy. increased pressure.

Brent crude futures ahead of the October settlement were down $1.58, or 1.6%, to $95.14 a barrel at 0640 GMT.

US West Texas Intermediate (WTI) crude futures for September delivery, which was set to expire Monday, fell $1.70, or 1.9%, to $89.07 a barrel. October’s more active contract was $88.92, down $1.52 or 1.7%.

Both Brent and WTI climbed for the third day in a row on Friday, but fell about 1.5% for the week on a stronger dollar and demand fears.

“Increasing fears of a global economic slowdown are behind the decline in oil markets,” said Tatsufumi Okoshi, senior economist at Nomura Securities.

“A higher US dollar also fueled new sales,” he said.

The dollar index rose to a five-week high on Monday after Richmond Fed president Thomas Barkin said the “urge” among central bankers was toward faster, frontal rate hikes. read more

A stronger dollar makes oil more expensive for buyers in other currencies.

Investors will pay close attention to the comments made by Fed Chair Jerome Powell as he addresses an annual global central bank conference in Jackson Hole, Wyoming on Friday.

read more

The Fed is considered to have more room to raise interest rates than central banks of other major economies that are more vulnerable.

Prices also fell on concerns about declining fuel demand in China, the world’s largest oil importer, following a power outage in the Southwest following a heat wave.

“China’s power limitation in some regions is also a concern as it could affect economic activity,” said Hiroyuki Kikukawa, general director of research at Nissan Securities.

China’s southwestern Sichuan province will extend restrictions on industrial power consumers until Aug. 25 as it tries to cope with declining hydropower production and rising household electricity demand after a long heatwave, financial news service Caixin said. read more

In a sign of general concern about the Chinese economy, Beijing cut its benchmark interest rate and cut the mortgage reference by a wider margin on Monday. cases. read more

Meanwhile, leaders of the United States, Britain, France and Germany discussed efforts to revive the 2015 Iran nuclear deal, the White House said on Sunday, though no further details were provided. read more

Reporting by Yuka Obayashi; Editing by Jamie Freed and Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.