U.S. crude oil slides to year's lowest on worries about more Fed hikes

SlavkoSereda

WTI and Brent crude oil prices fell for a third straight session Tuesday, with the U.S. benchmark settling at its lowest level in nearly a year, as the broader market selloff and worries about more aggressive monetary tightening by the Federal Reserve offset any positive effect from the new price cap on Russian oil sales.

Front-month Nymex crude (CL1:COM) for January delivery ended -3.5% to $74.25/bbl, its lowest since December 23, and February Brent crude (CO1:COM) finished -4% to $79.35/bbl, its weakest close since January 3.

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Data released Monday showed the U.S. ISM service sector index rising to 56.5% in November from 54.4% in October, which "triggered red flashing signals the Federal Reserve may keep interest rates higher for longer, increasing the odds of a U.S. recession" and less energy use, said Stephen Innes, managing partner at SPI Asset Management.

Oil traders are waiting to see how an EU-led cap on prices of Russian oil will affect the market, but the measure that some feared would destabilize the market has not yet impacted prices.

Nevertheless, more than a dozen oil tankers were stuck near the exit to the Black Sea following the imposition of the price cap, reportedly caused by a dispute between a group of maritime insurers and Turkish authorities.

Also, the Energy Information Administration raised its forecast for oil production next year to reach 12.34M bbl/day next year, breaking the record 12.31M bbl/day set in 2019, an about-face for the agency following a sharp downward revision in November.

After falling for three straight weeks, crude oil prices rose modestly last week.