Brent sharply down ahead of US Fed’s rate hike decision

The front-month ICE Brent contract has plunged $3.15/bbl lower on the day from Friday, to $73.10/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures gained some upward momentum a week ago, when Saudi Arabia-led oil-producing countries and allies, known as OPEC+, pledged to continue output cuts into 2024. The announcement was made at the OPEC+ meeting on 4 June.

OPEC+ nations have begun tightening production. Their combined crude oil output fell by 670,000 b/d in May after voluntary cuts announced in April came into force, a survey by S&P Global showed.

Crude output from the core OPEC group fell by 440,000 b/d on the month to 28.16 million b/d in May, the survey further showed. This could have helped Brent to pare some losses.

Downward pressure:

Brent futures have come off sharply over the weekend as the market awaits an interest rate decision from the US Federal Reserve (Fed), and as concerns over China’s fuel demand continue. Chinese data for May showed a year-on-year decline in manufacturing activity and an 8% drop in exports of all goods.

The Fed's two-day monetary policy meeting is scheduled to start from 14 June and has the global oil market’s focus fixated on the further possibility of rate hikes.

"Oil prices are caught in a clash between two opposing forces, bearish asset allocators who point to monetary contraction and bullish oil speculators expecting lower inventories in 2H23," Bank of America's Francisco Blanch said in a note.

The Fed is expected to deliver a “hawkish skip," OANDA’s analyst Ed Moya says. “If inflation ends up being too hot, the Fed could opt to deliver a rate hike,” he further adds.

By Aparupa Mazumder 

Please get in touch with comments or additional info to news@engine.online