Oil falls on fears of an economic slowdown and a stronger dollar

Oil pumping cranes at the Vaca Muerta oil and shale gas field in the Patagonian province of Neuquén, Argentina, Jan. 21, 2019. REUTERS/Agustin Markarian

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  • The dollar reached a 5-week high after the Fed’s hawkish comments
  • China’s Sichuan Province extends power restrictions over heatwave – Caixin
  • China lowers lending standards to revive faltering economy
  • Western leaders discuss Iran nuclear deal

LONDON (Reuters) – Oil prices fell on Monday as investors worried that sharp US interest rate increases could weaken the global economy and fuel demand, while a stronger dollar also affected.

Brent crude futures for October settlement fell $1.60, or 1.6 percent, to $95.12 a barrel by 0900 GMT.

US West Texas Intermediate crude futures for September delivery, which are due to expire on Monday, fell $1.56, or 1.7 percent, to $89.21 a barrel.

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The most active October contract was at $88.92, down $1.52, or 1.7%.

Brent and West Texas Intermediate rose on Friday for the third day in a row, but fell about 1.5% over the week on concerns about the dollar and stronger demand.

“Rising concerns about the global economic slowdown are behind the decline in oil markets,” said Tatsufumi Okoshi, chief economist at Nomura Securities.

“The rise in the dollar also led to new selling,” 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 are leaning toward faster rate increases. Read more

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Investors will be paying close attention to comments made by Federal Reserve Chairman Jerome Powell when he addresses the annual Global Central Banking Conference in Jackson Hole, Wyoming, on Friday.

Read more

Prices also fell on fears of slowing fuel demand in China, the world’s largest oil importer, due in part to the energy crisis in the southwest caused by the heat wave.

Financial news service Caixin said Sichuan Province will extend restrictions on industrial power consumers until August 25 as it tries to deal with dwindling hydropower production and surging household electricity demand. Read more

In a sign of general concern about the Chinese economy, Beijing cut the benchmark lending rate and lowered the mortgage reference by a larger margin on Monday, in addition to the easing measures announced last week, to revive the economy stumbled by the real estate crisis and the recovery of cases of the Corona virus disease. Read more

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

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Additional reporting by Yuka Obayashi. Editing by Christian Schmolinger and Jason Neely

Our criteria: Thomson Reuters Trust Principles.

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