Brent futures rise ahead of Fed decision

Front-month ICE Brent has gained $2.38/bbl in the past day, trading at $92.68/bbl at 09.00 GMT.

PHOTO: Crude futures have risen above $92/bbl ahead of the two-day Federal Open Market Committee (FOMC) meeting of the US Federal Reserve today. Getty Images

Upward pressure:

Data from the Joint Organisation Data Initiative show that Saudi Arabia's crude oil exports rose for a second straight month in July, to their highest level in over two years, according to Reuters.

In August, OPEC+ oil production trailed 3.6 million b/d below the group's target, reports Argus Media. OPEC countries produced 1.39 million b/d less than their target, and non-OPEC allies 2.19 million b/d less.

Downward pressure:

The US dollar is perched near a 20-year high ahead of the two-day Federal Open Market Committee (FOMC) meeting beginning today. Crude prices have seen downward pressure from the greenback since it rallied to a high on 1 September. Expectations for another major interest rate hike has driven the dollar up.

This week's central bank monetary policies, including those of the FOMC and Bank of Japan, will put investors on the lookout for rises in borrowing costs. The street expects the FOMC to maintain a hawkish stance by raising the key interest rate by 75-100 basis points.

“Recession worries will continue to act as a bearish weight on oil prices. Concerns that a global economic slowdown will hit demand for energy are still at the heart of the narrative. In other words, demand is still the name of the game when it comes to the oil market,” says PVM Oil Associates in a report.  

The International Energy Agency projects the first decline in Chinese oil demand since 1990. Chinese demand is forecast to decline by 420,000 b/d this year as the country faces recurring Covid-lockdowns and a property crisis.

By Konica Bhatt

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