(Bloomberg) -- Oil extended Thursday’s sharp selloff after the Federal Reserve signaled that further rate hikes were needed and European data continued to flag the risk of economic slowdown.
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West Texas Intermediate fell toward $68 a barrel after tumbling 4.2% on Thursday, while Brent fell through $73. In testimony this week, Fed Chair Jerome Powell signaled that further monetary tightening was likely in the second half. Data on Friday showed German economic activity lost much more momentum than anticipated in June, while France’s economy likely contracted in the second quarter.
Powell’s comments lifted the greenback, dimming the allure of commodities priced in the US currency.
The pace of moves in the oil market has also been exacerbated by technical trading in recent days, with both Brent and WTI falling away sharply after testing the upper ends of the bands in which they had been stuck since early May.
“Due to strengthening economic headwinds caused by recession fears, only conspicuous stock depletion will herald a protracted change in the currently ominous outlook,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd.
Oil is set for a back-to-back quarterly loss as, in addition to Fed moves, traders fret over demand. The slump has come despite production cuts from the Organization of Petroleum Exporting Countries and its allies. One key gauge of market health, Brent’s prompt spread, has weakened heavily in recent days, hitting the softest since January.
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--With assistance from Rob Verdonck and Yongchang Chin.
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2023-06-23 08:12:57Z
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