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 8 cents, or 0.1%, to $118.85 a barrel by 0008 GMT. Brent crude futures fell 26 cents, or 0.2%, to $120.91 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.
