Fajarasia.co – Oil prices were lower at the close of trading Tuesday (Wednesday morning WIB), amid concerns the US Federal Reserve will surprise markets with a higher-than-expected interest rate hike.
Brent crude futures for August delivery fell 1.10 dollars, or 0.9 percent, to settle at 121.17 dollars a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 2.0 dollars, or 0.7 percent, to close at 118.93 dollars a barrel.
Most Fed watchers expect the US central bank to raise interest rates by 50 basis points at its meeting Wednesday. But after Friday’s strong consumer price index (CPI) data for May, more were expecting a 75 basis point rate hike.
“This fear of a larger basis point gain is weighing on equities and oil,” said John Kilduff, partner at Again Capital LLC in New York.
Oil prices were pressured by reports that U.S. Senate Finance Committee chairman Ron Wyden plans to introduce legislation that stipulates an additional 21 percent tax on oil company profits that are deemed excessive, an official told Reuters.
The bill would impose an additional 21 percent tax on excess profits of oil and gas companies with annual revenues of more than $1 billion, the sources said.
The tight supply was exacerbated by a decline in exports from Libya amid the political crisis that hit production and ports.
Other OPEC+ producers are struggling to meet production quotas and Russia is facing a ban on its oil because of the war in Ukraine.
The US Department of Energy also announced a fourth sale notification of 45 million barrels of crude from its Strategic Petroleum Reserve.
UBS raised its Brent price forecast to $130 a barrel for the end of September and to $125 for the next three quarters, up from $115 previously.
“Low oil inventories, reduced spare capacity, and risks of supply growth slowing demand growth over the coming months have prompted us to raise our oil price forecast,” the bank said.
Ratings agency Fitch raised its Brent and WTI price assumptions for 2022 by 5 US dollars to 105 US dollars and 100 US dollars per barrel, respectively.
Markets await weekly reports from the American Petroleum Institute on Tuesday and the US Energy Information Administration on Wednesday for data on US crude and fuel inventories.
Six analysts polled by Reuters had expected US crude inventories to fall by 1.2 million barrels last week, while gasoline stocks rose 800,000 barrels and distillate inventories, including diesel and heating oil, were unchanged.
On the demand side, China’s latest COVID outbreak traced to a bar in Beijing has raised fears of a new phase of lockdown.
In its monthly report, the Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast that world oil demand would exceed pre-pandemic levels by 2022, but said Russia’s invasion of Ukraine and developments related to the coronavirus pandemic pose considerable risks.
The group expects demand growth to slow next year, an OPEC delegation and industry sources told Reuters, as soaring oil prices help drive inflation and act as a drag on the global economy.****
