Oil falls as central banks expected to raise interest rates

Oil prices declined today, Dec. 15, driven by the rise in the US dollar after the Federal Reserve decided to raise interest rates by 50 basis points (bps) on Dec. 14.

International benchmark Brent crude fell 0.56% to $82.29 a barrel, at 9:13 am Makkah time. West Texas Intermediate (WTI) crude lost 0.66% to reach $76.77 a barrel.

Several central banks are expected to follow suit during their meetings today, including the European Central Bank, Bank of England, and Swiss National Bank, reinforcing fears of a recession as monetary tightening continues globally.

Oil prices received additional pressure after China’s retail sales data, which contracted by 5.9% on an annual basis in November – the worst reading in six months – as COVID-19 cases rose, adding to fears of slowing demand by the second largest economy in the world.

However, Morgan Stanley, in a research note, said that it expects Brent crude to rise to around $110 a barrel by mid-2023, citing strong demand as China lifts lockdown restrictions and travel recovers.