(Bloomberg) — Oil in New York slid more than 5% after Federal Reserve Chair Jerome Powell said the strong U.S. economy may warrant ending the central bank’s asset purchases sooner than planned next year. 

Powell’s comments during a Senate Banking Committee hearing in Washington moved financial markets Tuesday as investors bet that a looming end to the taper could lead to an increase in interest rates. While tighter monetary policy can be a sign of economic strength, it’s typically bearish for commodities. The West Texas Intermediate crude oil futures dropped to $65 per barrel during this session for the first-time since August, as the benchmark global price fell. 

“That ties back to crude oil because if you start to pump the brakes on economic growth, you start to see impact on demand,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.

Oil markets are also trying to assess the effect of Covid-19’s omicron virus variant on global demand. OPEC+ will decide what to do when it meets this week. New travel restrictions threaten the rebound in global crude consumption that has underpinned this year’s price rally. 

RBC Capital Markets says that due to the rise of the micron version and subsequent oil price decline, the Organization of Petroleum Exporting Countries has increased its chances of deciding to suspend the planned monthly production growths at their next meeting.

Oil traders are also tracking talks this week aimed at reviving Iran’s 2015 nuclear deal with world powers. Success at the negotiations in Vienna could lift sanctions on Iran’s economy, leading to a resumption in official oil flows. A top European diplomat said that the talks began on Monday.

Data from Asia indicated that leading economies were experiencing improvements, which is good news for energy consumption. China’s manufacturing purchasing managers index has returned to expansion. Japan saw an increase in factory output.

The American Petroleum Institute (a private industry fund) reported that supply levels dropped to 700,000 barrels over the past week. This was according to those familiar with data. The U.S. government plans to publish its weekly inventory on Wednesday.

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