Tuesday saw a little increase in oil prices due to bargain hunters making up for the previous day’s drop, but gains were modest as investors remained cautious ahead of the US Federal Reserve and other central banks’ important policy decisions.
By 0048 GMT, Brent crude futures were up 16 cents, or 0.2%, to $72.00 a barrel. US West Texas Intermediate (WTI) crude was up 7 cents, or 0.1 percent, at $67.19 per barrel.
In the wake of increased global supply and worries about demand growth shortly before substantial inflation data and a two-day Fed fiscal policy meeting ending on Wednesday, both benchmarks fell by approximately $3 a barrel on Monday.
According to Tatsufumi Okoshi, a senior economist at Nomura Securities, “Some shareholders looked for bargains after the previous day’s heavy selling, whereas others held down their positions in accordance with speculation that Saudi Arabia may cut production further.”
Because of China’s sputtering economic recovery, he continued, oil prices face a further danger to the negative. He forecast that WTI would primarily trade below $70 per barrel during the summer, but would range from $62.50 to $75.
The majority of market participants anticipate that the US Federal Reserve will maintain current interest rates during its policy meeting. Rate increases by the Fed have made goods denominated in dollars costlier for investors of other currencies, which has a negative impact on prices.
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In order to control persistent inflation, the European Central Bank is anticipated to increase rates of interest by an additional quarter percentage point on Thursday. However, it is anticipated that the Bank of Japan will continue to adhere to its ultra-loose policy when it releases its plan on Friday.
China, the biggest importer of crude in the world, saw poor economic statistics last week, which countered an increase in prices brought on by Saudi Arabia’s promise to reduce output by an additional 1 million barrels per day in July.
According to Nomura’s Okoshi, the market is also anticipating demand projections from the Organisation of Petroleum Exporting Countries and the International Energy Agency.
Later on Tuesday, both groups will present their monthly market updates.
