Brent gains momentum ahead of US interest rate decisions

The front-month ICE Brent contract moved $0.25/bbl up on the day, to trade at $76.24/bbl at 09.00 GMT.

PHOTO: Oil pump jacks. Getty Images

Upward pressure:

Brent futures gained upward momentum ahead of key US interest rate decisions. The two-day US Federal Open Markets Committee's (FOMC) monetary policy meeting is scheduled to end tomorrow.

Brent's price is expected to remain stable following the conclusion of the last 2023 FOMC meeting. Oil market analysts anticipate that the US Federal Reserve will maintain interest rates at their current level for the remainder of this year.

“Oil [Brent] prices showed signs of stabilization on Monday, with investors shifting their attention to the Federal Open Market Committee (FOMC),” said SPI Asset Management’s managing partner Stephen Innes.

Meanwhile, growing tension in the Middle Eastern conflict also provided some support to Brent futures today. A missile launched by Yemen-based Houthis militants struck a Norwegian chemical tanker in the Red Sea yesterday, causing fire and damage to the vessel, Reuters reported citing two US defence officials. The militant group has warned that it will target every vessel bound for Israel.

The recent missile and drone attacks on vessels in the Red Sea have raised concerns about the safety of oil shipments in the region. This has further stirred supply concerns in the oil market again and pushed Brent’s price further up.

Downward pressure:

Multiple factors such as growing crude oil inventories in the US and general lag in oil demand in countries like China have added downward price pressure on Brent in recent days.

Moreover, uncertainties regarding the leading oil producer group’s (OPEC+) production cut policies have led to Brent’s price settling lower, analysts said. A recent Reuters survey also found that traders and analysts believe the OPEC+ 2.2 million b/d production cut will not be sufficient to boost Brent prices.

“For oil traders, the concerns are more about weekend demand fears,” said Price Futures Group’s senior market analyst Phil Flynn. “Last week Chinese oil imports hit a 7-month low and raised concern about their demand as US production is at record highs,” he further added.

By Aparupa Mazumder

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