Oil slumps on fear of economic slowdown, stronger dollar

Oil pump jacks are seen at the Vaca Muerta shale oil and gas storage facility in the Patagonian province of Neuquen, Argentina, Jan. 21, 2019. REUTERS/Agustin Marcarian

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  • Dollar hits 5-week high after aggressive Fed comments
  • China’s Sichuan extends power bands on heat wave – Caixin
  • China lowers credit benchmarks to revive faltering economy
  • Western leaders discuss nuclear deal with Iran

LONDON, Aug. 22 (Reuters) – Oil prices slumped Monday as investors feared aggressive rate hikes in the US could weaken the global economy and fuel demand, while a stronger dollar would weigh in as well.

Brent crude futures for the October settlement were down $1.60, or 1.6%, to $95.12 a barrel at 0900 GMT.

US West Texas Intermediate (WTI) crude futures for September delivery, which expires Monday, fell $1.56, or 1.7%, to $89.21 a barrel.

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October’s more active contract was $88.92, down $1.52 or 1.7%.

On Friday, both Brent and WTI climbed for the third day in a row, but fell about 1.5% weekly on a stronger dollar and demand concerns.

“Increasing fears of a global economic slowdown are behind the decline in oil markets,” said Tatsufumi Okoshi, senior economist at Nomura Securities.

“A higher US dollar also fueled new sales,” he said. A stronger dollar makes oil more expensive for buyers in other currencies.

The dollar index rose to a five-week high on Monday after Richmond Fed president Thomas Barkin said central bankers were leaning toward faster, frontal rate hikes. read more

Investors will pay close attention to the comments made by Fed Chair Jerome Powell as he addresses an annual global central bank conference in Jackson Hole, Wyoming on Friday.

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Prices also fell on concerns about declining fuel demand in China, the world’s largest oil importer, partly due to a power outage in the Southwest following a heat wave.

Sichuan province will extend restrictions on industrial power consumers until Aug. 25 as it tries to cope with declining hydropower production and rising household electricity demand, financial news service Caixin said. read more

In a sign of general concern about the Chinese economy, Beijing cut its benchmark interest rate and cut the mortgage reference by a wider margin on Monday. Covid cases. read more

Meanwhile, leaders of the United States, Britain, France and Germany discussed efforts to revive the 2015 Iran nuclear deal, the White House said Sunday, which could unleash sanctioned Iranian oil on the markets. read more

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Additional reporting by Yuka Obayashi; adaptation by Christian Schmollinger and Jason Neely

Our Standards: The Thomson Reuters Trust Principles.

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