Oil prices decrease as speculators believe that Federal Reserve rate hikes will reduce demand

Oil prices fell by more than $2 a barrel on Thursday after Federal Reserve Chair Jerome Powell's latest comments fueled worries that rising interest rates in the United States could hinder economic growth.

Brent oil futures settled at $1100.05 a barrel, a decrease of $1.69 or 1.5%. Futures contracts for U.S. West Texas Intermediate (WTI) crude settled at $104.27 a barrel, representing a loss of $1.92, or 1.8 percent.

Powell indicated that the Fed's objective of managing inflation was "unconditional" and that the strength of the job market was unsustainable, statements that fanned fears of more rate hikes.

Investors have lowered their exposure to risky assets as they assess whether inflation-fighting central banks' interest rate hikes may trigger a worldwide recession.

"If the United States and the rest of the world enter a recession, you might have a significant impact on demand," said Houston energy analyst Andrew Lipow.

In addition, Robert Yawger, director of energy futures at Mizuho in New York, feels that the high price of gasoline may be beginning to reduce demand.

"This has entered the conversation," Yawger said, adding that he felt fuel costs still had the ability to rise. AAA states that the current average retail price for a gallon of gasoline in the United States is $4.94, approximately 10 cents less than its all-time high.

According to a source with knowledge of the discussions, major U.S. oil refiners and Energy Secretary Jennifer Granholm left an emergency meeting with no concrete proposals to reduce prices, but with a commitment to work together.

Yawger noted that the most current estimates from the American Petroleum Institute suggested a rise in crude and gasoline inventories in the United States last week, which also weighed on pricing.

Official weekly estimates of U.S. oil inventories were scheduled to be released on Thursday, but technical challenges would delay the release until next week, according to the U.S. Energy Information Administration, which did not offer an exact date.

In an effort to cut oil prices and inflation, OPEC and allied producing nations, including Russia, will likely adhere to a plan for quick output increases, according to sources.

At its last meeting on June 2, the group known as OPEC+ agreed to increase production by 648,000 barrels per day in July, or 7 percent of global demand, and by the same amount in August, an increase from the initial plan to increase production by 432,000 barrels per day per month for three months until September.