Oil prices set for another weekly loss as traders focus on U.S. interest rates
Crude oil prices are on the slide again this week, with Brent set to end the week with a loss of some 3%, according to Reuters, and West Texas Intermediate on its way to shed about 4% unless a last-moment reversal happens by the end of the day.
Oil benchmarks have been trading at the lowest levels in about three months, according to Bloomberg, as traders remain fixated on U.S. interest rates. There has been no good news there, with the Fed signaling current rate levels are necessary to keep inflation in check, with Reuters noting there were some Fed officials who were not opposed to even more hikes instead of cuts.
From next week onwards, they might take a break from rates to see how the start of driving season in the U.S. is changing—or failing to change—demand patterns.
“The sore demand sentiment owing to the hawkish Fed outlook at rates and the backdrop of ‘possibly higher-for-longer rates’ weighed significantly on oil prices this week,” Phillip Nova analyst Priyanka Sachdeva told Reuters.
The latest Fed update was the focus of comments made by ING’s commodity analysts, too, as they noted the bearish effects the minutes of the latest Fed monetary policy meeting had on oil benchmarks.
“The weakness in oil prices increases the likelihood that OPEC+ members fully roll over their additional voluntary supply cuts into the second half of the year,” Warren Patterson and Ewa Manthey wrote.
A weekly inventory build in crude oil, as estimated by the Energy Information Administration, further increased the pressure on oil prices this week, reinforcing the expectation that OPEC+ will extend its production cuts of 2.2 million barrels daily into the second half of the year. To do otherwise at this point, would be extremely counterproductive in view of the goal of the cuts, which is to keep prices above a certain level.
