Home NewsCommodities News Oil up in Choppy, Pre-Fed Trade; Most-Active Crude Stays Under $100 By Investing.com

Oil up in Choppy, Pre-Fed Trade; Most-Active Crude Stays Under $100 By Investing.com

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Oil up in Choppy, Pre-Fed Trade; Most-Active Crude Stays Under $100 By Investing.com

© Reuters.

Barani Krishnan

Investing.com – Oil prices climbed in choppy trade ahead of this week’s Federal Reserve rate decision, although the most actively traded contracts for U.S. crude and global benchmark Brent remained below or just below the key $100 a barrel level for reasons There are differing views on the following requirements.

“Oil traders have set their sights on many of the same events this week as they try to better grasp the economic threat facing the U.S. and the rest of the world,” said Craig Erlam, an analyst at online trading platform OANDA. “A recession is crude oil prices. The main downside risk to the market, and this all keeps crude oil below $100 in the near term.”

Crude oil for September delivery, or WTI, was up $1.51, or 1.6%, at $96.83 a barrel in New York trading as of 1:30 p.m. ET (17:30 GMT). WTI fell nearly 3% last week, extending losses to nearly 13% over the past three weeks. In the last week alone, it fell to $90.58, its lowest level since Feb. 25.

London stocks rose $1.27, or 1.3%, to $99.65, extending last week’s 2.2% gain. The move followed a five-week losing streak in the global crude benchmark, down about 17%. Like WTI, Brent also hit a near five-month low of $95.42 during the period.

Volatility could be the game for oil and most risk assets this week as the Federal Reserve prepares to hit markets with its best price of the year. Traders will also try to interpret economic information from Federal Reserve Chairman Jerome Powell’s news conference on Wednesday following the Federal Open Market Committee’s rate decision.

The overwhelming consensus among forecasters is for another 75bps rate hike in July, as in June. If so, rates will rise to a range of 2.25-2.50% by the end of the month, up from 0-0.25% before the February rise.

There are still three interest rate decisions this year, and Fed officials say they will reach the high end of 3.5% or even 4% by the end of the year.

But money market traders also expect a rate cut by 2023 if the Fed’s rate hikes have too much of an impact on the economy. This comes after bets rose to 70% last week and a record 100 basis point rate hike in July.

Markets are even factoring in a rate cut next year, which tells economists that the risk of the Fed triggering a recession is fairly high between now and then.

The U.S. economy was 1.6% in the first quarter, and a loss in the second quarter could technically be called a recession. The first reading of second-quarter gross domestic product data will be on Thursday, the day after the Fed’s rate decision.

“Accelerating Fed tightening and this week’s disappointing U.S. earnings report could spark further weakness in the oil market, although I’m sceptical about the size of downside risks,” OANDA’s Erlam added. “Even if the odds of a recession rise. , the tension in the oil market can’t be ignored. A sustained dip below $90 still looks like a big call, and if it does materialize, it will be a double-edged sword.”

Phil Flynn of Chicago-based brokerage Price Futures Group also said that if WTI falls below $90, oil bulls will flock to the dips.

“Global oil inventories are lower than normal, and if the demand destruction is lower than one would expect, then we could see a significant increase in oil prices,” Flynn said. “High prices are encouraging more production, but it will take some time.”

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