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Oil Steadies After Weekly Loss as Market Looks Ahead to Fed Rate

In Business
June 10, 2024

(Bloomberg) — Oil steadied after a weekly drop with the market still digesting OPEC+’s decision to restore supply, as traders look ahead to a set of industry reports and a Federal Reserve decision on interest rates.

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Brent traded below $80 a barrel after losing 2.5% last week as algorithmic trading amplified declines following the alliance’s announcement it would start returning more supply from the third quarter. West Texas Intermediate was close to $76.

Traders will be watching for monthly reports from OPEC and the International Energy Agency, due Tuesday and Wednesday, that will shed light on the sector’s health. The Fed also releases its decision on interest rates mid-week. Strong economic data and stubbornly high inflation have seen the market pare bets the Fed is nearing its much-anticipated pivot to lower borrowing costs.

“Investors who overreacted to the OPEC announcement last week are trying to grasp the possibility that additional barrels might not end up entering into global supplies,” said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova Pte. Still, the macroeconomic outlook is at the forefront of traders’ minds, with growing concerns that Fed rates will remain high, she said.

After OPEC+’s announcement of a rollback in output cuts caused prices to slump, officials emphasized that the supply increase had always been provisional and could be paused.

Crude has been falling since early April on a weakening demand outlook, with money managers reducing net long positions on Brent by the most ever in data going back to 2011, taking holdings to the least bullish in a decade. Net longs for US benchmark WTI also retreated.

Geopolitics remained in focus. Tensions simmered in the Middle East after Israel freed four hostages in an operation in Gaza, part of an assault that killed more than 200 Palestinians, according to the Hamas-run government media office. And in Europe, far-right parties gained ground in European Parliament elections.

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