Oil advanced for a second day, with investors watching for any signs of fresh banking-industry trouble ahead of the Federal Reserve’s rate meeting this week.
(Bloomberg) — Oil advanced for a second day, with investors watching for any signs of fresh banking-industry trouble ahead of the Federal Reserve’s rate meeting this week.
West Texas Intermediate rose above $68 a barrel after swinging in a $3-plus range on Monday. Traders are starting to return to risk markets after authorities stepped in to shore up the financial system. US officials are also studying ways they might temporarily expand protection for all deposits.
The banking crisis will eventually be bullish for oil because it will hit supply harder than demand, according to Jeff Currie, Goldman Sachs Group Inc.’s global head of commodities. There’s no sign yet that contagion is weakening physical demand for raw materials, he said Tuesday at the FT Commodities Global Summit in Lausanne, Switzerland.
Financial-sector tremors have boosted expectations that major central banks including the Federal Reserve will slow the pace of monetary tightening even as inflation remains elevated. Fed policymakers decide their next step on Wednesday, with investors increasing bets on a quarter-point hike.
There’s “still not much confidence or conviction in the market yet, but it does seem that the path of least resistance is modestly higher,” said Paul Horsnell, head of commodities research at Standard Chartered Bank.
Crude prices have fluctuated this year amid concerns that the Fed will keep ratcheting up interest rates, and anticipation about China’s demand as the country recovers from years of pandemic-related lockdowns. Banking turmoil, recession fears, and resilience in Russian flows helped to drive prices lower earlier this month.
Energy Daily, Bloomberg’s daily energy and commodities newsletter, is now available. Sign up here.
–With assistance from Yvonne Man, David Ingles and Grant Smith.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.