Oil falls more than 1% ahead of US Federal Reserve rate decision

Singapore, June 12 (BNA): Oil prices fell on Monday ahead of the US Federal Reserve meeting as investors tried to gauge the central bank’s willingness to raise interest rates, while concerns about growing fuel demand in China and increasing supply of Russian crude weighed on the market. .

Brent crude futures fell 97 cents, or 1.3 percent, to $73.82 a barrel by 0437 GMT. Reuters reported that US West Texas Intermediate crude was at $69.24 a barrel, also down 1.3%.

Both benchmarks posted a second consecutive weekly decline last week as disappointing Chinese economic data raised concerns about demand growth in the world’s largest crude importer, offsetting higher prices from Saudi Arabia which pledged to cut production by 1 million barrels per day in July. .

“Oil prices are caught in a clash of two opposing forces, bearish asset allocators pointing to a monetary contraction and bullish oil speculators anticipating inventories falling in the second half of 23,” Francisco Blanch of Bank of America Global Research said in a note.

“The declining distributors will retain control for now, as oil prices struggle to rise until the Fed eases the money supply,” Blanche said. The bank still expects Brent crude to average around $80 a barrel in 2023.

Interest rate hikes by the Federal Reserve have boosted the dollar, making dollar-denominated commodities more expensive for holders of other currencies and affecting prices.

Most market participants expect the US central bank to leave interest rates unchanged when it concludes its two-day monetary policy meeting on Wednesday.

“We maintain our call for a soft landing in the US, but policy could tighten further if growth does not slow, and financing pressures in the banking system keep risks skewing to the downside,” Seth Carpenter, an economist at Morgan Stanley, said in a note.

On the supply side, Blanche said that while Saudi Arabia has cut oil production four times in the past year, Russian supplies have been disrupted as sanctions are designed in a way to have less impact on production.

Russian oil exports to China and India have grown despite the implementation of the EU embargo and the G7 price cap mechanism that began in early December.

Goldman Sachs cut its oil price forecast due to higher-than-expected supplies from Russia and Iran, and raised its 2024 supply forecast for producers and Venezuela by a total of 800,000 barrels per day.

The Bank’s December crude oil price forecast is now $86 per barrel for Brent, down from $95, and $81 per barrel for WTI, down from $89.

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