Oil slips amid expectation of central banks’ hiking rates again

London — Oil prices fell on Tuesday as the prospect of further interest rate increases and ample Russian crude flows outweighed demand recovery expectations from China.

March Brent crude futures fell by $1.01, or 1.19%, to $83.89 a barrel by 9.20am GMT. The March contract expires on Tuesday and the more heavily traded April contract fell by 90c, or 1.07%, to $83.60.

Likewise, US West Texas Intermediate (WTI) crude futures dropped 92c, or 1.18%, to $76.98 a barrel.

“Central banks and the Opec+ producer group will be in action in the next few days. Interest rate decisions will shed some light on the prospects of economic and oil demand growth,” said Tamas Varga of oil broker PVM.

Investors expect the US Federal Reserve to raise interest rates by 25 basis points (bps) on Wednesday, with half-point increases coming from the Bank of England (BoE) and European Central Bank (ECB) the following day.

Higher rates could slow the global economy and weaken oil demand.

Meanwhile, a panel from members of oil cartel Opec is likely to recommend keeping the group’s current output policy unchanged when it meets on February 1 at 11am GMT, Opec+ delegates said on Monday.

The panel, called the joint ministerial monitoring committee (JMMC), can call for a full Opec+ meeting if warranted.

Further bearish sentiment followed news that Russia’s oil loadings from its Ust-Luga port are expected to rise at the beginning of February, despite western sanctions imposed over its invasion of Ukraine.

Price falls were cushioned by signs of potentially healthy demand coming from China, with the country’s official purchasing managers index (PMI), which measures manufacturing activity, rising in January from December, according to the National Bureau of Statistics (NBS).

Meanwhile, the International Monetary Fund (IMF) has raised its 2023 global growth outlook slightly due to “surprisingly resilient” demand in the US and Europe, an easing of energy costs and the reopening of China’s economy after Beijing abandoned its strict Covid-19 restrictions.


Source: businesslive.co.za