August 9, 2022

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Oil rises as dollar strength eases, but Fed presses

Oil rises as dollar strength eases, but Fed presses

Oil pump cranes at the Vaca Muerta oil and shale gas field in the Patagonian province of Neuquén, Argentina, Jan. 21, 2019. REUTERS/Agustin Markarian/File Photo

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  • The US Federal Reserve will hold its policy meeting on July 26-27
  • Libya plans to increase oil production to 1.2 million barrels per day within two weeks – NOC
  • EU adjusts sanctions to open Russian oil deals with third countries
  • Russia will not supply oil to countries that impose price ceilings – Central Bank

HOUSTON (Reuters) – Oil prices rose on Monday, boosted by supply concerns, a weaker US dollar and a strengthening stock market, but prices are on the swing as some fear higher US interest rates could dampen fuel demand.

Brent crude futures for September rose $1.86, or 1.8%, to $105.06 a barrel by 1402 GMT by 11:35 AM ET (1535 GMT), while US West Texas Intermediate crude futures rose $1.94, or 2%. to $96.61 a barrel. barrel.

“A little weaker dollar and improving stock markets are supporting oil,” said Giovanni Stonovo, oil analyst at UBS. (.stoxx)

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Oil futures have been volatile in recent weeks, under pressure from concerns that higher interest rates could curb economic activity and thus dampen fuel demand growth but buoyed by tight supply especially since the Russian invasion of Ukrainian and Western sanctions on Moscow.

“The US and European economies are slowing, and with the Fed poised to raise interest rates again this week, traders remain very cautious,” said Dennis Kessler, senior vice president of trading at BOK Financial.

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Federal Reserve officials indicated that the US central bank is likely to raise interest rates by 75 basis points at its July 26-27 meeting.

China, the world’s second-largest economy, did not experience a contraction in the second quarter, growing just 0.4% year-on-year. Read more

But the sharp front month premium over the second month still points to tight supply in the near term. The spread settled at $4.82 a barrel on Friday, its highest level ever when excluding expiration-related rallies in the previous two months.

Libya’s National Oil Corporation said it aims to restore production to 1.2 million barrels per day within two weeks, from about 860,000 barrels per day.

But analysts expect Libyan production to remain volatile as tensions persist after clashes between rival political factions at the weekend. Read more

Prices were also supported by “expectations that Russian oil supplies will decline in the coming months, as widely expected plans to cap Russian oil prices may have a more adverse effect on oil prices than hoped,” Warren Patterson, head of commodities, said. Strategy at ING.

The European Union said last week that it would allow Russian state-owned companies to ship oil to third countries under an amendment to sanctions agreed by member states last week aimed at reducing risks to global energy security. Read more

But the governor of the Russian Central Bank, Elvira Nabiullina, said on Friday that Russia would not supply oil to countries that decided to impose a price ceiling on its oil. Read more

Additional reporting by Yuka Obayashi in Tokyo; Editing by David Evans, Louise Heavens, Tomasz Janowski and David Gregorio

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