Rising oil prices with a view to the Fed

Oil prices are rising, recovering from losses at the beginning of the session amid concerns over fuel demand and the wider economy in anticipation of the expected sharp rise in interest rates by the US Federal Reserve.

In a volatile session, brent futures for August rose 46 cents, or 0.4%, to $ 121.63 a barrel, after falling to $ 120.65 a barrel earlier in the session, after falling 0. 9% on Tuesday.

West Texas Intermediate for July delivery rose 41 cents, or 0.3 percent, to $ 119.34 a barrel, after hitting a low of $ 118.22 a barrel earlier, down 1.7 percent yesterday.

Rising inflation has led investors and traders to prepare for a big move by the Fed this week – an increase of 75 basis points, which, if implemented, would be the largest rate hike in 28 years in the US. .

“A message of aggressive growth from the US Fed could heighten concerns about a global recession, which could limit demand in the energy market,” said a Daily FX analyst.

“If the Fed announces an increase in interest rates by 75 basis points today, oil prices could be particularly weak against the dollar in the short term, as an aggressive Fed could lead investors to the dollar and hit assets like oil,” he added.

In terms of demand, the recent rise in coronavirus cases in China has heightened concerns about a new phase of restrictions.

The country’s economy, however, showed signs of recovery in May after declining last month as industrial production rose unexpectedly.

In its monthly report, OPEC maintained estimates that global oil demand would exceed pre-pandemic levels in 2022.

“Overall, the supply / demand situation remains tight, and I can not see the reality changing until the global economy slows down sharply,” analysts said.