Oil maintains losses as concerns over economic slowdown weigh on market
(Bloomberg) – Oil posted losses ahead of key central bank interest rate decisions as concerns about a global economic slowdown linger.
Bloomberg’s Most Read
West Texas Intermediate futures traded near $86 a barrel after losing about 3% in the previous two sessions. The Federal Reserve is expected to make a rate decision on Wednesday as central banks continue to tighten monetary policy to keep inflation in check. Meanwhile, the CEO of major trader Vitol Group said oil demand had started to fall due to high prices.
A strong US dollar added to bearish headwinds, making commodities priced in the currency less attractive to investors. The Bloomberg Dollar Spot Index recently rebounded after falling late last month.
While oil has lost nearly a third of its value since early June, futures capped the first monthly gain since May last month after the OPEC+ alliance agreed to deep production cuts. Excess supply was the main reason for the production cut from November, the group’s general secretary, Haitham al Ghais, said on Monday.
“If interest rates are going to rise, then there is more risk of a recession, and OPEC would be right to fear that this could lead to further demand destruction,” said Vishnu Varathan, head of the Economy and Strategy for Asia at Mizuho Bank. “That said, OPEC’s bias is to keep supply tight because high prices are an economic boon they are unlikely to be willing to give up.”
Click here to read Bloomberg’s daily Europe Energy Crunch blog
Cuts by the Organization of the Petroleum Exporting Countries and its allies will be followed by European Union sanctions on flows of Russian crude, further clouding the supply outlook. Moscow has mostly failed to find new markets for its oil which it must secure before EU sanctions take effect from December 5.
A U.S.-led plan to cap the price of Russian oil sales, as part of the broader international response to the invasion of Ukraine, will temporarily exempt shipments loaded before December 5, according to the Department of US Treasury. Cargoes must be unloaded by January 19 to benefit from the exemption.
Elements, Bloomberg’s daily energy and commodities newsletter, is now available. Register here.
Bloomberg Businessweek’s Most Read
©2022 Bloomberg LP