Brent crude rises on optimism over final rate cut

The front-month ICE Brent contract has moved $0.46/bbl higher on the day from Friday, to trade at $73.95/bbl at 09.00 GMT.

PHOTO: A silhouette of an oil pump jack at dusk. Getty Images

Upward pressure:

Brent crude’s price has gained at the onset of the final trading week of the year. The oil market and the broader financial markets will be on the watch out for this week’s US Federal Reserve (Fed) interest rate meeting.

“All eyes turn to the U.S. Federal Reserve, which is expected to trim rates at the year’s climactic FOMC meeting,” SPI Asset Management’s managing partner Stephen Innes said.

The US Fed will meet on 18 December to decide on a final interest rate cut for this year. Oil market analysts expect the US central bank to cut rates one last time before year-end, especially after the latest US inflation data, which came in “hot”.

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

This data has left room for a final interest rate cut, as the US Fed tries to achieve its 2% inflation target. “On December 18th, the Federal Reserve is poised to trim interest rates by 25 basis points, nudging policy from the tight grip of restriction closer to a neutral stance,” Innes added.

Downward pressure

Brent’s price felt some downward pressure, with the easing of some supply-related concerns.

Reports suggested last week that the Biden administration was planning to adopt stricter oil sanctions against Iran and Russia. However, contrary to market expectations, no concrete decisions have been made yet.

The delay in announcing the fresh sanctions has weighed down on Brent’s price, analysts said.

“The US has yet to announce any fresh sanctions against Russian oil exports, a move reportedly in the offing that helped prop up prices last week,” VANDA Insights’ founder and analyst Vandana Hari said.

By Aparupa Mazumder

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