Crude oil prices plunged more than 2 percent on Wednesday as fears of further monetary tightening by Federal Reserve triggered worries about recession and the potential demand for crude oil. Concerns that European Central Bank, Bank of England, Reserve Bank of Australia etc. have not yet stopped hiking rates added to worries about the depth of the rebound in China. The Fed's decision would be known later in the day. The ECB would announce its decision on Thursday while the Bank of England's review is slated for next week.
The Dollar's weakness, amidst expectations that the Fed would pause after a widely expected 25-basis points rate hike in the current session dragged the Dollar Index (DXY), a measure of the Dollar's strength against a basket of 6 currencies, 0.41 percent overnight to 101.54. The Dollar's weakness however did not suffice to support crude oil prices overwhelmed by concerns about a recession triggered by the unabated rate hikes.
Tighter inventory position in the U.S. also failed to provide support for crude oil prices. Data released by the American Petroleum Institute on Tuesday showed crude oil inventories in the U.S. falling by 3.94 million barrels in the week ended April 28, higher than market expectations of a 1 million decline. Inventories had fallen by 6.1 million barrels in the previous week.
Official data from the Energy Information Agency is due later in the day. Markets are expecting a 1.1 million draw in inventories versus a 5.1 million draw in the previous week.
Brent Oil Futures for July settlement traded between $79.78 and $72.91. It is currently at $73.27, down 2.72 percent from the previous close.
West Texas Intermediate Crude Oil Futures for June settlement too traded tight, between a high of $71.78 and a low of $69.22. The current price of $69.56 represents a loss of 2.93 percent from the previous close.
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