Oil falls as interest rates halt pipe deliveries to Poland

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Oil fell as fears that the Federal Reserve will continue to raise US interest rates to fight inflation overshadowed the latest supply disruption in Europe and optimism about a recovery in demand in China.

West Texas Intermediate crude fell below $76 a barrel after failing to sustain an early rise. While Poland’s largest oil company, PKN Orlen SA, unexpectedly stopped receiving oil via the Druzhba pipeline from Russia, traders remain worried that still high inflation in the US will force the Fed to continue raising rates. This could help the dollar, trigger a recession in the US and hurt commodities.

Crude oil is trading in a tight $10 range this year as investors weigh a host of conflicting forces, including the outlook for supplies from Russia, the reopening of China, and the trajectory of monetary policy. The outlook for the market will come under scrutiny in the coming days as traders gather in London for International Energy Week, one of the industry’s iconic events.

“A series of positive inflation surprises in the US so far has sparked another round of hawkish recalibration of rate hike expectations,” said Yep Jun Rong, market strategist at IG Asia Pte in Singapore. However, any faster-than-expected recovery in China’s economy could support the demand outlook, he said.

While the European Union has banned shipments of Russian oil and petroleum products by sea, some pipeline flows have remained. Poland has repeatedly said it plans to completely cut off imports of Russian oil, and Orlen said the cutoff would not affect consumers, which it said it was preparing for.

In connection with the tightening of sanctions against Russia, Europe in February imported a large amount of diesel fuel, increasing supplies from Asia and the Middle East. According to former US Treasury Secretary Lawrence Summers, the restrictions on Russia didn’t really “bite that hard” because China, India and Turkey didn’t join in.

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