Oil steadied after four weekly gains as traders weighed prospects for another hike from the Federal Reserve against signs of a tighter market.
(Bloomberg) — Oil steadied after four weekly gains as traders weighed prospects for another hike from the Federal Reserve against signs of a tighter market.
Brent crude traded little changed near $81 a barrel in London, having gained roughly 10% since late June. Prices have strengthened as Saudi Arabia and its partners in OPEC+ cut supplies. 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 in their push to rein in inflation and give guidance on the likelihood of additional moves. The tightening cycle risks tipping the world’s largest economy into recession, potentially harming demand.
Oil remains lower this 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 such as crude.
“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 neared the 200-day moving average in April but failed to manage a close above that level. Prices have again approached the figure this month, which is less than 30 cents away. 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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