HOUSTON: Oil prices fell 2 percent on Tuesday, reversing previous gains as U.S. consumer prices rose in August. Price giving cover for the U.S. Federal Reserve to deliver another sharp interest rate hike next week.
Brent futures for November delivery fell $2.05, or 2.2 percent, to $91.95 a barrel at 11:38 a.m. ET (1638 GMT). U.S. crude fell $1.73, or 2 percent, to $86.05 a barrel.
The consumer price index gained 0.1% last month after remaining unchanged in July, the U.S. Labor Department said. Economists polled by Reuters had forecast a 0.1% drop.
Fed officials will meet next Tuesday and Wednesday, with inflation well above the U.S. central bank’s 2% target.
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“The Fed may have to raise rates faster than expected, which could cause a ‘risk pullback’ sentiment in crude and further strength for the dollar,” said Dennis Kissler, senior vice president of operations at BOK Financial.
Oil is usually priced in U.S. dollars, so a stronger dollar makes the product more expensive for holders of other currencies.
Renewed COVID-19 restrictions in China, the world’s second-largest oil consumer, also weighed on crude prices.
The number of trips made during China’s three-day Mid-Autumn Festival holiday fell. The tourism revenues also fell showed by official data. The Covid-related restrictions discouraged people from traveling.
Both contracts rose by more than $1.50 a barrel earlier in the session, supported by concerns about tighter inventories.
“The structural outlook for the oil market remains one of rigidity. This is offset by cyclical demand headwinds,” Morgan Stanley said in a note.
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