Oil is falling ahead of the OPEC + and US Federal Reserve meetings

SINGAPORE (Reuters) – Oil prices fell on Monday, giving up previous gains, as global producers are likely to keep output unchanged at this week’s meeting and investors remain cautious ahead of a US Federal Reserve meeting that could spur market volatility.

Brent crude futures fell 74 cents, or 0.8 percent, to $85.92 a barrel by 0710 GMT, while US West Texas Intermediate crude was $79.07 a barrel, down 61 cents, or 0.8 percent.

Ahead of the Federal Reserve’s policy meeting scheduled for January 31-February. 1, the market widely expects the US central bank to raise interest rates by at least 25 basis points, adding to concerns that extended increases in borrowing costs by the Fed will stifle fuel demand growth in the world’s largest oil consumer.

Serena Huang, head of Asia-Pacific analysis at Vortexa, said in an email that oil prices are “likely to be affected by potential interest rate hikes at the next Fed meeting.”

Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, collectively known as OPEC+, are unlikely to adjust their current oil production policy when they meet around Feb. 1.

However, a sign of rising crude exports from Russia’s Baltic ports in early February caused Brent and WTI to post their first weekly loss in three last week.

“No change in OPEC+ production is expected to be announced at this week’s meeting and we expect future comments from the US Federal Reserve to be the main driver of the near-term outlook,” National Australia Bank analysts said in a research note.

Oil prices rose earlier on Monday amid tensions in the Middle East following a drone attack on oil producer Iran.

Stefano Grasso, a portfolio manager at 8VantEdge in Singapore, said that while it was not yet clear what was happening in Iran, any escalation there would likely disrupt the flow of crude.

China, the world’s largest crude importer, pledged over the weekend to promote a recovery in consumption that would support fuel demand after it ended strict COVID-19 restrictions in December.

The country will resume business this week after the Lunar New Year holiday. Citing data from the Department for Transport, Citi analysts said in a note that the number of pre-holiday travelers rose above levels in the past two years but was still below 2019.

“The overall recovery of international traffic remains gradual, with per capita teen numbers up to a low to the 2019 level, and we expect a further recovery when tour group travel resumes departing on February 6,” the Citi memo said.

(Reporting by Florence Tan and Emily Chow) Editing by Muralikumar Anantharaman and Christian Schmollinger

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