Oil steadied near a three-month high as traders weighed the prospect of another hike from the Federal Reserve against signs of a tighter crude market.
(Bloomberg) — Oil steadied near a three-month high as traders weighed the prospect of another hike from the Federal Reserve against signs of a tighter crude market.
Brent crude traded above $81 a barrel in London, having added roughly 10% during four straight weekly gains. Prices have strengthened as Saudi Arabia and its partners in OPEC+ cut output. International Energy Agency Executive Director Fatih Birol said over the weekend that the market could return to a supply deficit.
US central bank policymakers are widely expected to deliver another rate increase at this week’s meeting as they continue in their push to rein in inflation. The tightening cycle risks tipping the world’s largest economy into recession, potentially harming oil demand.
Crude is still down for the year, despite the recent run of gains and production cuts by the Organization of Petroleum Exporting Countries and its allies, including Russia. On the demand side, China’s stalled recovery has been a persistent headwind for industrial commodities.
“There is probably still some concern on the upcoming FOMC meeting,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich, who predicts Brent may climb to $90 a barrel by year’s end. “But generally I would say the market seems to believe on-land inventories are in the process of starting to fall.”
US benchmark WTI is rising toward the 200-day moving average — a key technical threshold. It came close to this in April, but failed to settle above that level. A similar challenge looms for Brent.
Among other metrics, there are signs of strength in the market’s underlying structure. WTI’s prompt spread — the difference between its two nearest contracts — was 33 cents a barrel in backwardation, a bullish pattern that’s near the widest since mid-November on a closing basis.
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