Oil little changed as markets debate fed hikes and supply woes

Crude oil storage tanks are seen in an aerial photograph at the Cushing Oil Hub in Cushing, Oklahoma, the United States, April 21, 2020. REUTERS/Drone Base

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  • Strong dollar weighs as Fed rate decision looms
  • Supply concerns limit the decline
  • China’s easing of COVID-19 restrictions could provide support

HOUSTON, Sept 19 (Reuters) – Oil prices held steady in volatile trading on Monday as traders balanced worries about tight supplies with concerns that global demand could slow on the back of a strong US dollar and possible sharp hikes in interest rates.

Central banks around the world are certain to hike borrowing costs this week to curb high inflation, and there is some risk of a full percentage point hike from the US Federal Reserve.

Brent crude for November is down 6 cents at $91.29 a barrel by 11am ET (4:00pm GMT), down 0.1%. US West Texas Intermediate (WTI) rose 3 cents to $85.14 a barrel in October.

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“While the news that OPEC missed production targets by over 3 million barrels a day last month should have been positive for crude oil, the macro aspect of rate hikes and a possible recession takes first place,” said Dennis Kissler, Sr Vice President of Trading at BOK Financial.

Many traders have once again moved to the sidelines to await this week’s Fed meeting, Kissler added.

A UK bank holiday to mark the funeral of Queen Elizabeth capped trading volume during London business hours on Monday. Continue reading

The organization of petroleum exporting countries and allies led by Russia, known as OPEC+, missed its oil production target by 3.583 million barrels per day (bpd) in August, an internal document showed. In July, OPEC+ missed its target by 2.892 million bpd. Continue reading

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However, oil also came under pressure on hopes of an easing of the European gas supply crisis. German buyers reserved capacity to purchase Russian gas via the decommissioned Nord Stream 1 pipeline, but this was later revised and no gas flowed. Continue reading

Crude oil has risen sharply this year, with the Brent benchmark nearing a record high of $147 in March after Russia’s invasion of Ukraine heightened supply concerns. Concerns about weaker economic growth and weaker demand have pushed prices lower since then.

The US dollar remained near a two-decade high ahead of this week’s decisions by the Fed and other central banks. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies and tends to weigh on oil and other risky assets.

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The market has also been pressured by forecasts of weaker demand, such as last week’s International Energy Agency forecast of no demand growth in the fourth quarter. Continue reading

“The market is still hanging over the start of European sanctions on Russian oil. With supply disrupted in early December, the market is unlikely to see a quick response from US producers,” ANZ analysts said.

The easing of COVID-19 restrictions in China, which had dampened the demand outlook for the world’s second-largest energy consumer, could also provide some optimism, analysts said. Continue reading

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Additional reporting by Alex Lawler in London, Florence Tan and Jeslyn Lerh Editing by David Goodman, David Evans and David Gregorio

Our standards: The Thomson Reuters Trust Principles.

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