WASHINGTON (DTN) -- Coinciding with a falling stock market, oil futures traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange fell on Thursday after several Federal Reserve officials signaled the central bank would continue raising interest rates until clear evidence emerges that inflation is abating despite growing risks of causing a deep downturn for the economy in the process.
Federal Reserve Bank of Cleveland President Loretta Mester reiterated on Thursday that the central bank, which has raised the benchmark federal funds rate 3% this year, must continue aggressively raising rates to restrain high inflation.
"The Fed got the persistence and magnitude of inflation wrong," Mester acknowledged in an interview on CNBC, adding that "the recession will not stop the Fed from hiking rates."
The same sentiment has been echoed in comments from St. Louis Federal Reserve Bank President James Bullard who believes the market has finally got the message of the central bank's resolve to fight inflation.
U.S. equities on Thursday erased all gains from Wednesday's fleeting relief bounce spurred by the Bank of England's announced bond-buying program, with all major indexes ending the session sharply lower.
At the market close, Dow Jones Industrials was down more than 450 points and the Nasdaq fell 2.8%, while S&P hit a new 2022 low, down more than 2%.
A stronger-than-expected jobless claims report released Thursday morning didn't help sentiment, suggesting the persistence of inflation and building on the notion that the Federal Reserve will need to remain aggressive with rate hikes. Weekly unemployment claims fell below 200,000 to 193,000 last week, according to the Department of Labor, the lowest since early May.
Internationally, investors continue to monitor developments around suspected sabotage attack on Nord Stream 1 and 2 natural gas pipelines that run under the Baltic Sea after a series of sudden blasts blew out three lines. The attack triggered a military warning from the North Atlantic Treaty Organization, cautioning all parties that might be involved against targeting energy infrastructure.
Sudden and unexplained leaks from the undersea Nordstream pipelines from Russia to Germany appear "not a coincidence," European Union said on Thursday, a statement which adds weight to fears of sabotage. While no evidence has been provided, speculation is swirling that Russia itself might be behind the attack on this critical infrastructure.
Furthermore, French's TotalEnergies said Thursday the company would step up security vigilance in coordination with Dutch authorities after Denmark detected "unusual" drone activity around the largest Danish oil field, Halfdan.
This comes against heightened EU-Russia standoff that escalated earlier this month when Gazprom halted gas deliveries through Nord Stream 1, blaming debilitating impact of Western sanctions. Nord Stream 1 is the single biggest pipeline for gas from Russia to Europe and has the capacity to deliver 55 billion cubic meters of gas a year. Continued supplies through the pipeline have been seen as crucial to prevent a deepening of the energy crisis.
At settlement, November West Texas Intermediate futures slipped $0.92 to $81.23 per barrel (bbl). ICE November Brent futures declined $0.83 to $88.49 bbl ahead of expiration Friday afternoon, with the December contract expanding its discount to November delivery to $1.31 bbl.
NYMEX October RBOB futures fell 7.03 cents to $2.5076 gallon, with the November contract settling at $2.4027 gallon. The October ULSD contract declined 3.48 cents to $3.4146 gallon, widening its premium to the November contract to 11.92 cents. October products futures also expire Friday afternoon.
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