Oil Creeps Higher Ahead of Looming Central Bank Rate Hikes

(Bloomberg)

Brent oil edged toward $93 ahead of several global interest-rate decisions that are expected to see further monetary tightening.The Fed and other central banks from Europe to Asia are expected to deliver interest-rate hikes this week as they seek to tame rampant inflation that’s hit demand. Brent futures rose as much as 1.1% Tuesday, before paring those gains, and remain within the $10 band in which they have fluctuated this month.Crude has lost about a third of its value since early June, erasing all the gains made in the wake of Russia’s invasion of Ukraine, as concerns about a global slowdown weigh on demand. Liquidity also thinned, leading to volatile price swings, while a stronger dollar has added to headwinds.“The whole market waits for how hawkish the Fed meeting will be,” said Keshav Lohiya, founder of consultant Oilytics. “Risk-on assets continue to remain on edge.”

The potential for increased supply has weighed on the outlook. The US said Monday it would offer an additional 10 million barrels of oil from its strategic reserves in November, ahead of plans by the European Union to ban Russian crude in December.

Still, Saudi Aramco warned that when the global economy recovers the world’s spare oil production capacity could be eliminated. The company’s chief executive officer said that by the time the world realises the issue it maybe too late to change course.

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Prices:
WTI for October delivery, which expires Tuesday, rose slightly to $86.10 a barrel. The more-active November contract climbed to $85.71 at 8:59 a.m. in New York. Brent for November settlement gained 0.5% to $92.49 a barrel.

Investors also are weighing the prospect of higher Iranian crude flows should protracted talks on reviving a nuclear deal reach a conclusion. Discussions on efforts to resurrect an accord on the sidelines of the United Nations General Assembly in New York are “a possibility,” Foreign Ministry spokesman Nasser Kanaani said at a press conference.

Elsewhere, Russia’s seaborne crude exports fell sharply in the first half of September. Crude shipped from its ports dropped by almost 900,000 barrels a day in two weeks, to 2.54 million barrels a day in the week to Sept. 16, from 3.42 million in the seven days to Sept. 2.