Brent gains as market focuses on upcoming Fed meeting

The front-month ICE Brent contract has moved $0.39/bbl higher on the day, to trade at $73.67/bbl at 09.00 GMT.

PHOTO: Oil pumpjacks photographed at dusk. Getty Images

Upward pressure:

Brent’s price moved higher as the global oil market shifted its focus on today’s Federal Open Market Committee (FOMC) meeting, where the US Federal Reserve (Fed) is expected to announce another interest rate cut before the year ends.

Market analysts expect the US Fed to cut interest rates by another 25 basis points. Lower interest rates in the US can make dollar-denominated commodities like oil more affordable for holders of other currencies.

“Today's highly anticipated FOMC meeting has traders on edge, with markets already factoring in a 25bps [25 basis points] rate cut by the Federal Reserve,” SPI Asset Management’s managing partner Stephen Innes said.

The inflation rate in the US, measured by the change in the Consumer Price Index (CPI), rose to 0.3% in November, inching up from a 0.2% growth recorded in the previous month, the US Labor Department's Bureau of Labor Statistics (BLS) reported.

This has left room for one last rate cut in 2024 by the US central bank, analysts said. “This [rate cut] expectation stems from the latest inflation data, where November's CPI aligned with forecasts, showing no unexpected spikes,” Innes said.

Downward pressure:

Brent futures felt some downward pressure due to concerns about weak oil demand growth in China.

China’s National Bureau of Statistics (NBS) reported that the country’s retail sales growth came in weaker than unexpected in November, rising only by 3% year-on-year, and noting a sharp drop from the 4.8% growth achieved in October.

“Continued concerns about the demand outlook in China have otherwise been the [oil market’s] focus this week,” analysts from Saxo Bank said.

By Aparupa Mazumder

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