Global oil prices on Thursday evening fell by about 1%; investors assess the prospects for demand after raising key rates by central banks around the world, according to trading data and expert comments. Why has oil fallen in price?

Oil prices are falling. The price of February futures on Brent crude oil fell by 1.02% down to $81.86 per barrel, while January futures on WTI oil dropped by 0.82% to $76.65.

The Federal Reserve announced Wednesday that it would raise its benchmark interest rate by 50 basis points, to an annual rate of 4.25 to 4.5 percent. Regulator head Jerome Powell said at a news conference that the Fed believes it is appropriate to keep the rate high until the decline in inflation is stable and sustained.

Also, the European Central Bank (ECB) and the Bank of England announced rate hikes on Thursday. Both regulators raised their key rates by 50 basis points to 2.5% and 3.5%, respectively. Also, the ECB lowered its 2023 GDP growth forecast to 0.5% from the September estimate of 0.9%. By contrast, the inflation forecast was raised to 8.4% for 2022 from September’s 8.1%, 6.3% for 2023 from 5.5%, and 3.4% for 2024 from 2.3%.

The tightening of monetary policy by global central banks and their raising of interest rates in response to high inflation increases the risks of a recession. This situation is negative for demand prospects, which is holding back oil prices.

“Higher inflation forecasts and lower economic growth forecasts, as well as keeping interest rates high for a longer period of time, seem likely to force the market to reconsider the demand outlook over the next few months,” CMCMarkets market analyst Michael Hewson told Agence France-Presse.

We previously reported that ING analysts forecast an average Brent crude oil price of $104 a barrel in 2023.