Oil prices dip amid Fed fears, rate hike jitters
Oil prices dropped on Monday due to investors taking profits following significant gains the previous week. Additionally, the strength of the dollar ahead of an important Federal Reserve meeting had a negative impact.
The possibility of limited resources pushed the prices to reach their highest points in almost three months, as the reduction in production from Saudi Arabia and Russia started to impact the markets.
Indications of consistent oil consumption in the United States, combined with expectations of additional economic support in China, have also lifted oil prices in the past month.
But this pattern was slightly balanced out by the expectation of a two-day Federal Reserve meeting, commencing on Tuesday. It is widely predicted that the central bank will.
The price of futures decreased by 0.5% to $80.48 per barrel, while futures also fell by 0.5% to $76.67 per barrel by 21:06 ET (01:06 GMT). Both agreements had experienced four consecutive weeks of increases, prompted by significant producers indicating that oil markets would be more constrained for the rest of the year.
Busy Week Ahead: Central Banks Dominate Headlines
The Federal Reserve is widely anticipated to increase interest rates by 25 basis points after a two-day meeting on Wednesday.
However, the financial markets were still uncertain about whether the central bank would declare the conclusion of its rate hike cycle, which has lasted for almost 16 months.
Indicate that traders anticipate the upcoming rate increase from the Federal Reserve to be its final one for this week. Consequently, it is predicted that the United States' interest rates will stay fixed at 5.5% without any further adjustments throughout the year.
Any signs of additional increases are expected to have a negative impact on the oil industry, as the market is concerned about the potential worsening of economic conditions this year due to higher interest rates.
The solidified predictions of a rise in interest rates this week had a strong impact on oil prices and other commodities that are valued in US dollars.
In addition to the Federal Reserve, the attention this week is also on the European Central Bank (ECB) and the . The ECB is also widely anticipated to raise interest rates by 25 basis points on Thursday, although the European bank recently indicated that its rate increase cycle is nearing its conclusion.
Stricter fiscal measures have a negative impact on economic growth, ultimately affecting the demand for oil. This concept put a strain on oil prices during the previous year.
China's Stimulus Under Scrutiny
Oil markets are additionally anticipating any further actions from China, the largest buyer of crude oil globally, to bolster the expansion of their economy.
Newly released statistics indicate that there was an increase in China's economic performance during the second quarter, which is likely to result in an increase in government spending from the capital city of China, Beijing.
The government has also pledged to back consumer expenditure, potentially facilitating the revival of demand from the lows experienced during the pandemic.
