Brent extends decline as investors remain wary of central bank interest rate decisions
Front-month ICE Brent has declined by $2.14/bbl on the day, to $83.89/bbl at 09.00 GMT.
PHOTO: Federal Reserve Chairman Jerome Powell answering reporters' questions at the FOMC press conference on July 27, 2022. US Federal Reserve via Twitter
Upward pressure:
Russian President Vladimir Putin and Saudi Crown Prince Minister Mohammed bin Salman Al Saud have discussed "cooperation within the OPEC+ group" to maintain oil market stability. The discussion between two major OPEC+ members precedes the Joint Ministerial Monitoring Committee (JMMC) meeting tomorrow, where the committee is expected to recommend maintaining the group's current oil output policy.
The oil market is also anticipating a shift in supply dynamics as EU sanctions on refined Russian oil products take effect this Sunday.
The European Commission has suggested that two price caps on refined Russian oil products could be set to $100/bbl for "premium" products like gasoil and diesel, and $45/bbl for "discount" products like fuel oil. Price cap talks are expected to conclude this week, Reuters reports, citing EU officials.
The Russian government has approved procedures for implementing a presidential order on measures to counter the crude oil price cap. While Russia's response to the impending EU sanctions has yet to be seen, oil market experts estimate that Russia will cut around 1 million b/d of production.
Downward pressure:
“Crude prices are declining as the risks to the global outlook become overwhelming,” OANDA senior market strategist Edward Moya says. He says investors are cautious ahead of a busy week of monetary policy meetings at the Bank of England, US Federal Reserve and European Central Bank.
"Oil markets are facing downside pressure as risk-off trades prevail ahead of the US Federal Reserve’s policy meeting, along with a strengthened US Dollar," CMC Markets analyst Tina Teng has told Reuters.
The International Monetary Fund (IMF) has forecast a fall in global inflation this year in its latest World Economic Outlook update. However, it is too early for markets to start celebrating, as the IMF has also predicted a "subpar" 2.9% rate of global growth this year.
The IMF has warned that global economic growth could be imperiled by China's delayed economic recovery, the escalation of the Russia-Ukraine war, and tighter global financing costs.
By Konica Bhatt
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