Oil a tad higher ahead of Federal Reserve policy decisions

Oil prices declined by nearly $3 a barrel on Monday after analysts cited surging global supplies.

Oil prices moved a tad higher on June 13, recovering some of the ground after the previous day’s fall but the recovery was limited as investors were cautious ahead of the US Federal Reserve and other central banks’ rate decisions.

The benchmark Brent crude futures soared 16 cents, or 0.2 percent, to $72.00 a barrel by 0048 GMT (6.18 am IST). US West Texas Intermediate (WTI) crude was at $67.19 a barrel, up 7 cents, or 0.1 percent.

Oil prices declined nearly $3 a barrel on June 112 after analysts cited surging global supplies and concerns over subdued demand just ahead of key inflation data and the Fed’s meeting on June 14.

“Some investors looked for bargains after the previous day’s heavy selling while others held back their positions with speculation that Saudi Arabia may cut production additionally,” news agency Reuters quoted Tatsufumi Okoshi, a senior economist at Nomura Securities, as saying.

On June 12, Goldman Sachs lowered its forecast for oil prices by nearly 10 percent, citing weak demand in China and a glut of supply from sanctioned countries, including Russia.

The investment bank, in its report released on June 11, cut its Brent outlook for December to $86 a barrel, down from $95 a barrel. Further, it has slashed its WTI (West Texas Index) forecast for December from $89 per barrel to $81.

Also ReadGoldman Sachs cuts Brent outlook for December to $86 a barrel from $95

The rate shadow

Most market participants expect the Fed to keep interest rates static at its policy meeting. The Fed’s rate increases have boosted the dollar, making dollar-denominated commodities more costly for holders of other currencies.

Reports also said that the European Central Bank is likely to raise interest rates by another quarter percentage point on June 15 to contain sticky inflation. However, the Bank of Japan, which will unveil its plan on July, is likely to maintain its ultra-loose policy.

Last week’s weak Chinese economic data flagged concerns about slowing energy demand, offsetting a boost in prices from top crude exporter Saudi Arabia’s decision to reduce production by another million barrels per day, effective July.

(With agency inputs)