(Bloomberg) -- Oil extended losses for a third session as investors weighed the prospect of further monetary tightening to combat surging US inflation and the potential for more virus restrictions in China.
West Texas Intermediate futures fell more than 1% to trade near $119 a barrel amid a broader market selloff. US inflation accelerated to a fresh 40-year high last month, raising the likelihood of more aggressive interest-rate hikes from the Federal Reserve. Beijing and Shanghai are tackling rising virus cases as the world’s biggest crude importer navigates a bumpy return from lockdowns.
Oil is still up almost 60% this year as rebounding economic demand coincided with a tightening market following Russia’s invasion of Ukraine. The war has fanned inflation, driving up the cost of everything from food to fuels. US retail gasoline prices have repeatedly broken records and recently hit $5 a gallon.
Goldman Sachs Group Inc (NYSE:GS). reiterated on Friday that energy prices need to climb further for Americans to start cutting consumption. Consumer resilience is “still sufficient to absorb the higher prices at the pump,” Damien Courvalin, a senior commodity strategist at the bank, said on Bloomberg Television.
The US has repeatedly asked OPEC to pump more crude to help tame rising gasoline prices and the hottest inflation in decades. President Joe Biden said on Saturday that hasn’t yet made a decision about visiting Saudi Arabia, but that if he went it would be to take part in meetings that go beyond energy topics. A visit would reflect a shift in diplomatic priorities.
Beijing said a Covid-19 outbreak linked to a popular bar is proving more difficult to control than previous clusters, in a weekend that saw mass testing and rising infections both in the city and Shanghai. Authorities also delayed the reopening for most schools in the capital planned for Monday.
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