Brent sheds ahead of US policy meeting

The front-month ICE Brent contract lost $0.17/bbl on the day from Friday, to trade at $88.95/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Reports that Israel is ramping up plans for further ground and air assaults on southern Gaza’s Rafah region and the ongoing concerns about Ukraine’s attacks on Russia’s oil infrastructure have continued to support Brent’s price. 

“Tensions in the Middle East remain elevated despite tit-for-tat attacks between Israel and Iran not leading to any escalation in the Israel-Hamas war,” Saxo Bank’s head of FX strategy Charu Chanana said. “Supply risks are also emerging as Russia and Ukraine target each other’s energy infrastructure,” she added.

Downward pressure:

Brent futures lost upward momentum after the US Federal Reserve’s (Fed) chair Jerome Powell “expressed concerns” about persistent inflation in the world’s largest oil consuming nation, market analysts said.

Powell also emphasised that interest rate cuts “would be on hold until the Fed gains greater confidence in inflation moving sustainably toward the 2 percent target,” SPI Asset Management’s managing partner Stephen Innes said.

Members of the US central bank are scheduled to convene over the next two days to discuss interest rate cuts at the Federal Open Market Committee (FOMC) meeting.

“The [oil] market has virtually priced in a more hawkish Fed scenario; other than removing all cuts from the dot plot, it’s unlikely the Fed will hawkishly surprise the market,” Innes added.

Higher interest rates can dampen global demand by increasing the cost of commodities like oil for non-dollar holders.

By Aparupa Mazumder

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