Brent inches lower ahead of Fed meeting

The front-month ICE Brent contract has lost by $0.17/bbl on the day, to trade at $67.08/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

Brent crude’s price has gained some upward momentum as traders factor in production risks to Russian energy supplies, with Ukrainian drone strikes on its oil infrastructure continuing to intensify.

Yesterday, Kyiv struck the Kirishi oil refinery, one of Russia’s largest oil refining facilities, Reuters reported. The facility has halted a major processing unit following the attack, the report added.

The refinery has an “annual processing capacity of over 20mt [20 million mt],” according to ANZ Bank’s senior commodity strategist Daniel Hynes.

Last week, Ukraine struck one of Russia’s largest oil exporting terminals in Primorsk. The strikes coincide with reports that Washington and the EU are preparing tighter sanctions on Russia and on major buyers of its energy exports, particularly China and India.

“The market participants are waiting for any further developments regarding the potential of further Western sanctions on Russian supplies,” remarked two analysts from ING Bank.

Downward pressure:

Brent’s price has moved lower as market participants shift focus to the US Federal Reserve’s (Fed) meeting scheduled for today and tomorrow.

The meeting carries significant weight, with the US central bank expected to decide whether to maintain interest rates at current levels or implement a cut, according to market analysts.

Oil prices came under pressure last week after US inflation rate, based on Consumer Price Index (CPI) rose 2.9% year-on-year in August, up from 2.7% in July, dampening the likelihood of interest rate cuts.

Higher interest rates in the US can dampen demand growth and make dollar-denominated commodities like oil more expensive for holders of other currencies.

By Aparupa Mazumder

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