• Oil prices have plummeted to near $101.00 on renewed demand worries.
• Investors are ignoring the dubious promise of the OPEC to pump more oil.
• Rising Covid-19 curbs in China has dented the oil demand.

West Texas Intermediate (WTI), futures on NYMEX, has plunged around 7.50% after printing a high of $110.33 last week. Oil prices have faced the heat of strengthening odds of a 75 basis point (bps) interest rate hike by the Federal Reserve (Fed) in June.

The multiplier effects of tight monetary policy have started spreading from risk-perceived currencies to global equities and now to fossil fuel prices. An extremely tight liquidity environment will not only absorb funds from the market but will also trim the growth forecasts. Unavailability of easy money will force the corporate to invest wisely, which will spurt the jobless rate and reduce the aggregate demand, whose effect will be visible on oil prices.

Meanwhile, rising curbs in China to contain the epidemic of the Covid-19 have raised concerns over the current demand for oil. The extreme lockdown measures in Beijing and Shanghai have paused the movement of men, materials, and machines, which have reduced the oil demand vigorously.

Apart from that, investors have shrugged off the oil supply worries after the OPEC+ promised to pump more oil into the global supply.  The OPEC cartel has promised to add 432,000 barrels per day (bps), which seems quite dubious as a few nations are unable to produce the desired output while some are near to exhaustion of their production capacities.