Brent futures falter over expectations of further US Fed interest rate hike
Front-month ICE Brent has declined by $1.63/bbl on the day, to $79.06/bbl at 09.00 GMT.
PHOTO: US Federal Reserve building in Washington DC. Getty Images
Upward pressure:
China’s commerce ministry has approved 111.82 million mt in non-state imports of crude oil in a second batch of quotas for this year, market intelligence firm JLC has reported, citing official sources.
“China issued a fresh batch of import quotas, a signal that the world’s largest importer is ramping up [refinery utilisation] to meet higher demand,” ANZ commodity strategist Daniel Hynes.
In terms of demand, China's Vice-Minister of Transport Xu Chengguang expects 2.1 billion passenger trips during the seven-day Spring Festival period beginning 22 January, which is almost 100% more than last year.
Meanwhile, according to S&P Global Commodities, Russian seaborne crude exports dropped to a two-year low in December. Reduced exports could force Russia to cut production, and by extension dent global output.
“Russian oil exports edged up last week, but they are showing little sign of reversing the recent downward trend. Combined flows to China, India and Turkey hit their lowest since October,” says Hynes.
Downward pressure:
JPMorgan has lowered its Brent price forecast for the year. Its head of global commodities strategy Natasha Kaneva says the investment bank will shave $8/bbl off its 2023 price forecast “on our expectations that Russian production will fully normalise to pre-war levels by mid-2023.”
Oil futures investors will focus on the US Federal Reserve's (Fed) monetary policy once again. The Fed will make an announcement at the end of this month and is expected to raise its overnight borrowing interest rate.
The Fed's key interest rate climbed to the highest level in 15 years after the 50-basis-point hike in December. Consumer demand will be weighed down by further interest rate increases, which could weigh on oil prices.
By Konica Bhatt
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