Crude oil prices sank on Thursday afternoon while the market was eyeing the Federal Reserve’s speech for clues about future interest rate hikes.
At 3:00 p.m., ET, WTI had slipped $1.90 per barrel (-2.00%) to $92.99, with Brent crude slipping $1.33 (-1.31%) to $99.89—sinking under $100 again.
The downward trend is just the latest swing on Thursday as the market attempts to understand the impact that a rate hike will have on crude oil demand compared to the impact that an OPEC+ production cut would have on supply.
Federal Reserve Chairman Jerome Powell is set to speak on Friday at an annual economic policy symposium.
Earlier this week, OPEC+ sources said that the group could respond to what the Saudi oil minister said was a disconnect between the physical crude oil market and the paper one. Other OPEC+ sources confirmed that OPEC+ could consider making production cuts at the next meeting, although the topic has not been formally added to the agenda.
Further dragging down the price of crude oil is the possibility that Iran and the United States could agree on the terms of a new nuclear deal. A new nuclear deal would free Iran’s oil industry from U.S. sanctions, potentially increasing the amount of crude oil that the country is able to export.
Should Iran and the U.S. reach a deal, OPEC+ would be even more motivated to cut production.
While OPEC+ has threatened to cut production, it is questionable whether that means to cut production targets, which it is undershooting by more than 2 million bpd anyway, or whether it would be an actual production cut based on current production volumes. Either way, the specter of any cuts, whether to targets or production, has the power to raise prices—a reality that is spooking traders loathed to be on the wrong end of any sudden market swing.