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100bps Fed rate hike could drag oil lower

Signs of an economic recovery in China are offering some support for oil prices before the weekend, allowing Brent to tread water above the psychologically-important $90/bbl level for the time being.

Yet Brent is still adhering to the downtrend that has persisted since June, and remains on course for a third straight weekly decline.

100bps Fed rate hike could drag oil lower

Oil prices have been dragged lower by the red-hot US dollar as well as growing risks for a global recession amid the wave of rate hikes by central bankers.

If the Fed triggers a gargantuan 100bps hike next week, or signals to the markets that the 4.5% peak for the ongoing rate hike cycle is inadequate to tame stubbornly elevated inflation, that may well translate into Brent revisiting its recent cycle low around $87/bbl.

However, further drastic drops in oil benchmark prices may invite stronger supply intervention from OPEC+, with the alliance keen to see prices being restored closer to market fundamentals.



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