• Central bank rate hikes, led by BoE, stoke fears of diminished oil demand.
• WTI falls despite recent OPEC output cuts and surprise dip in US crude inventories.
• Traders shift focus to China’s upcoming factory activity data amidst concerns over an economic slowdown.

Western Texas Intermediate (WTI), the US crude oil benchmark, plummeted more than 3% after more central banks led by the Bank of England (BoE) raised interest rates, which weigh on growth, suggesting less demand for oil. At the time of writing, WTI is trading at $69.28 per barrel after hitting a daily high of $72.61.

Crude oil tumbles over 3% as central banks tighten, and China’s economy weakens

Investors sentiment remains fragile, though shifted slightly positive, as US equities trade mixed. WTI erased Wednesday’s gains. Increased concerns over an economic slowdown in China weigh on Oil prices, despite the crude output cuts foreseen by OPEC , as seen in the latest rate cuts implemented by the People’s Bank of China (PboC).

Aside from this, the BoE raised rates by 50 bps, dampening the economic outlook in the UK., as higher rates could slow economic growth.

In the meantime, the US Federal Reserve (Fed) Chair Jerome Powell concluded its first-half testimony before the US Congress, maintaining its neutral stance, reiterating that two interest rate increases are still on the table.

Nevertheless, traders seem to ignore the latest Fed dot plots revealed last week, as shown by the CME FedWatch Tool, as they only expect one additional increase in July of 25 bps as odds lie at 76.9%.

A US Energy Information Administration (EIA) report revealed that crude inventories fell by 3.8 million barrels last week to 463.3 million, below analysts’ expectations for a 300,000-barrel rise.

Meanwhile, WTI traders’ focus shifted towards releasing China’s factory activity next week, which could shed some light on the strength of China’s economy.

WTI Technical Levels