Ana sayfa » Oil prices soar on bargain hunting ahead of central banks’ policy decisions

Oil prices soar on bargain hunting ahead of central banks’ policy decisions

Earnings are limited as investors remain cautious

by BUNKERIST

Oil prices rallied on Tuesday’s bargain hunt and rebounded somewhat after the previous day’s slump, but gains were limited as investors remained cautious ahead of key policy decisions by the US Federal Reserve and other central banks.

Brent crude futures rose 77 cents, or 1.1%, to $72.61 a barrel as of 0640 GMT. West Texas Intermediate (WTI) crude was up 56 cents, or 0.8%, to $67.68 a barrel.

Both gauges fell by around $3 a barrel on Monday, amid key inflation data and concerns over rising global supply and demand ahead of the two-day Fed monetary policy meeting that ended Wednesday.

While some investors were looking for bargains after the previous day’s heavy sales, others took positions on speculation that Saudi Arabia could cut production further.

Some analysts predict that Brent oil could fall further due to China’s faltering economic recovery and WTI will trade in the $62.50 to $75 per barrel range over the summer, but essentially trade below $70 a barrel.

Most market participants expect the US central bank to keep interest rates unchanged at its policy meeting. The Fed’s rate hikes strengthened the dollar, made dollar-denominated commodities more expensive for holders of other currencies, and put pressure on prices.

The European Central Bank is expected to raise interest rates another quarter point on Thursday to rein in persistent inflation. However, the Bank of Japan, which will announce its plan on Friday, is expected to maintain its extremely loose policy.

Disappointing economic data in China last week raised concerns about the demand from the world’s largest importer of crude and offset the rise in prices from Saudi Arabia’s commitment to cut further output in July.

The market awaits demand outlooks from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).

The recent drop in oil prices raises the possibility that Saudi Arabia will extend the currently in effect supply cuts until at least July. On this basis, market speculation about the possibility of further supply disruptions at the next OPEC meeting is likely to increase oil price volatility.

Saudi Arabia said last week it will cut July output by 1 million barrels per day (bpd) to 9 million barrels, the biggest drop in years, in an effort to boost prices.