Oil prices slide on renewed demand fears

Oil prices edged lower as demand fears were renewed by restrictions to limit the spread of coronavirus in China’s Chengdu. A stronger dollar dented gold's appeal.

Shreyansi Singh

Updated Sep 7, 2022, 15:38 IST

Representative Pic

Photo : iStock

KEY HIGHLIGHTS

China’s Chengdu Double down on zero-covid policy
Gold declines as stronger dollar, bond yields dent appeal
Dollar hits multi-year high against the yen

Mumbai: Oil prices slid on Wednesday as coronavirus curbs fanned fears of a hit to fuel demand due to a slowdown in economic growth.

Top importer China doubled down on its zero-covid policy in Chengdu maintaining strict COVID-19 curbs in the city of 21 million despite a major earthquake that killed at least 65 people.

Oil prices have declined in the last three months, after rising to multi-year peaks in March on worries that interest rate hikes and coronavirus curbs in parts of top importer China may slow global economic growth and soften oil demand.

Oil pared gains after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+ decided to cut output targets by 100,000 barrels per day.

This was against the backdrop of Saudi Arabia flagging weak oil prices since June.

Russia, the world’s second-largest oil producer did not back an output cut this time.

Meanwhile, the country's exports and imports lost momentum in August. Growth substantially missed forecasts with crude oil imports falling 9.4% in August from a year earlier, according to official data.

Interest rate hikes were also on investors’ radar with the European Central Bank widely expected to lift rates sharply when it meets on Thursday.

Next up on the list of cues to watch out for with regard to interest rate hikes is the U.S. Federal Reserve meeting on Sept. 21.

Gold declines as stronger dollar, bond yields dent appeal

Gold prices edged lower, weighed down by a stronger U.S. dollar, an uptick in treasury yields and as investors expected the U.S. Federal Reserve to continue hiking interest rates aggressively.

The Federal Reserve is largely expected to deliver a 75-basis point rate increase on September 21.

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