Rogelio V. Solis/AP
- US oil prices slid below $70 a barrel on Wednesday ahead of the Fed's rate hike decision.
- West Texas Intermediate crude traded lower 3% to $69 a barrel.
- That comes amid growing fears of a recession in the US, as high rates threaten to overtighten the economy.
US oil prices slid below $70 a barrel on Wednesday, thanks to mounting recession fears in the US while the Fed readies its last possible rate hike.
West Texas Intermediate crude fell 3% on Wednesday morning to trade at $69.57 a barrel. Meanwhile, Brent crude, the international benchmark, slid 2.75% to trade at $73.24 a barrel.
Markets are currently pricing in an 87% chance the Fed raises rates another 25 basis points at the conclusion of its policy meeting on Wednesday, and an 83% chance it will pause at its next policy meeting in June.
Fed officials raised interest rates over 1,700% in the past year to lower inflation, but high rates threaten to overtighten the economy into a recession, experts warn — a risk that has been amplified with recent banking turmoil and a looming debt ceiling crisis.
The likelihood of a recession within the next 12 months has jumped to nearly 60%, according to the New York Fed Recession Probability Index.
Energy Aspects co-founder Amrita Sen said she believed the drop in oil prices was largely spurred by comments by US Treasury Secretary Janet Yellen, who warned this week that the US could run out of money and default on its debt in less than a month.
"Given the environment right now, there is so much uncertainty on the macro front, I am expecting prices to remain under pressure until the debt ceiling is sorted out," Sen told CNBC on Wednesday.
Still, she added oil could rebound in the second half of the year as supply cuts from OPEC+ producers push prices upward. That could lead WTI crude to top $100 a barrel by the end of the year, she said, even in the event of a mild recession.