*
U.S. new unemployment benefits claims rise by most in 5
months
*
Strike halts deliveries from TotalEnergies' French
refineries
*
Upcoming - U.S. Labor Department Feb employment report on
Friday
(Adds latest prices)
By Scott DiSavino
NEW YORK, March 9 (Reuters) - Oil prices slid about 1%
to a two-week low on Thursday on increased worries the U.S.
Federal Reserve may go too far with its interest rate hikes to
control inflation, which could cause a recession and reduce
future oil demand.
The U.S. central bank uses higher interest rates to reduce
inflation. But those higher rates increase consumer borrowing
costs, which can slow the economy.
"The Fed is continuing to come ... for inflation and that is
translating into fears over lower oil demand down the road
because of a possible recession," said John Kilduff, a partner
at investment advisory Again Capital LLC in New York.
Brent futures fell $1.07, or 1.3%, to settle at
$81.59 a barrel, their lowest close since Feb. 22.
U.S. West Texas Intermediate (WTI) crude fell 94
cents, or 1.2%, to settle at $75.72, their lowest close since
Feb. 27.
That put both benchmarks down for a third day in a row with
WTI down about 6% and Brent down about 5% during that time.
The number of Americans filing new claims for
unemployment benefits increased by the most in five months last
week, but the underlying trend remained consistent with a tight
labor market.
"Decelerating growth continues to weigh on crude prices,"
said Edward Moya, senior market analyst at data and analytics
firm OANDA.
Renewed hawkishness from the Fed is pushing investors to
game out how a regime of “higher for longer” interest rates
could weigh on U.S. stocks with some market watchers saying the
combination of higher bond yields and sticky inflation bodes
poorly for equity returns.
Kilduff noted that the U.S. bond auction Thursday afternoon
"spooked the market" and "was the catalyst for the risk off
sentiment" for the oil and stock market declines.
Crude futures and Wall Street stocks were both trading
higher Thursday morning on thoughts the U.S. unemployment data
could push the Fed to slow the pace of future interest rate
hikes.
Wall Street stocks fell on Thursday, with all three major
stock indexes down as investors worried
that a jobs report on Friday could spur aggressive interest rate
hikes by the Federal Reserve.
Analysts expect the U.S. economy to have added 205,000 jobs
last month - a sharp deceleration from January - and see the
unemployment rate holding firm at 3.4%.
Also supporting oil prices earlier on Thursday,
TotalEnergies was unable to make deliveries from its French
refineries on Thursday because of continued strike action a day
after data showed an unexpected decline in U.S. crude
inventories last week. "The halt in deliveries from TotalEnergies' French
refineries due to the nationwide strikes together with the
slight weakness in the dollar might attract some shorts to cover
part of their positions," Tamas Varga of oil broker PVM told
Reuters.
(Additional reporting by Alex Lawler in London, Stephanie Kelly
in New York and Emily Chow in Singapore; Editing by David
Goodman, Shounak Dasgupta, Paul Simao and Cynthia Osterman)
