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Oil prices tick up on supply woes but Fed rate hike bets cap gains
Oil prices ticked up today on supply concerns, but expectations of another aggressive US interest rate hike capped gains amid investor concerns it could lead to a recession and hurt fuel demand.
Brent crude futures rose 11 cents, or 0.1%, to $90.73 a barrel in early trade after falling $1.38 the previous day.
US West Texas Intermediate crude was at $83.99 a barrel, up 5 cents, or 0.1%.
The October delivery contract expired down $1.28 yesterday while the more active November contract lost $1.42.
“The bullish factor is always the undersupply issue that is caused by sanctions on Russia,” said Tina Teng, an analyst at CMC Markets.
“Iran’s nuclear deal faced obstacles, which will not bring extra supply any time soon,” she said.
The US said that it did not expect a breakthrough on reviving the 2015 Iran nuclear deal at this week’s UN General Assembly, reducing the prospects of a return of Iranian barrels to the international market.
The OPEC+ producer grouping – the Organization of the Petroleum Exporting Countries and associates including Russia – is now falling a record 3.58 million barrels per day short of its production targets, or about 3.5% of global demand. The shortfall highlights the underlying tightness of supply in the market.
But oil prices remained under pressure due to a further rise in the US bond yields, which lifted the dollar further ahead of the Fed’s rate decision, Teng added.
The Fed is widely expected to hike rates by 75 basis points for the third time in a row later today in its drive to rein in inflation.
Other central banks, including the Bank of England, meet this week as well.
“In the absence of any major fresh developments on the fundamentals front, crude, by default, is under the influence of the sombre mood in the broader financial markets,” said Vandana Hari, founder of Vanda Insights in Singapore.
The dollar also hovered near a two-decade peak against a basket of currencies today, making oil more expensive for holders of other currencies.
Meanwhile, US crude and fuel stocks rose by about 1 million barrels for the week ended September 16, according to market sources citing American Petroleum Institute figures yesterday.
US crude oil inventories were estimated to have risen last week by around 2.2 million barrels in the week to September 16, according to an extended Reuters poll.
The head of Saudi state oil giant Aramco warned yesterday that the world’s spare oil production capacity may be quickly used up when the global economy recovers.
Article Source: Oil prices tick up on supply woes but Fed rate hike bets cap gains – RTE
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