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Oil falls lower ahead of expected rate hikes, OPEC meeting

By Myra P. Saefong and William Watts

Natural gas futures are at their lowest since April 2021

Oil futures fell on Monday, extending the declines from last week as investors waited for expected rate hikes from the Federal Reserve and other central banks.

The outcome of an OPEC+ committee meeting and the Federal Reserve’s monetary policy decision will both come on Wednesday, while the European Union’s ban on imports of Russian petroleum products will begin on February 5.

Price action

Market drivers

Crude lost ground in rangebound trading last week as investors continue to assess the demand outlook following China’s fall of COVID-19 limits. Traders also appeared reluctant to comment ahead of Wednesday’s meeting of the OPEC+ Joint Ministerial Monitoring Committee, which scrutinizes the oil market but lacks the capacity to make official decisions on output policy. The next plenary meeting of OPEC+ members is scheduled for June.

Read: OPEC+ committee meets next week with broad oil uncertainties to discuss

The Federal Reserve, meanwhile, is expected to deliver a 25 basis point, or quarter-percentage point, rate hike when it concludes a two-day policy meeting on Wednesday. The European Central Bank is expected to deliver another rate hike when it meets on Thursday.

“Aggressive sentiment about potential future rate hikes will give weakness to crude and refined products across the board,” analysts from StoneX’s Kansas City energy team wrote in Monday’s newsletter.

See: The Fed and the stock market are set for a showdown this week. Here’s what’s at stake

The OPEC+ committee meeting is unlikely to signal a shift in output policy “given persistent uncertainty clouding the market, both from a supply and demand perspective,” strategists Warren Patterson and Ewa Manthey said in a statement. of raw materials by ING.

Crude had climbed in early Asian trade following reports of a suspected Israeli drone strike on targets inside Iran, they wrote.

Read: What drone strikes on Iran mean for oil prices

“It is not yet clear whether a fire at a refinery was also linked to the attack. Iran is pumping just over 2.5 million barrels a day and there have been reports of increased exports in recent months,” they said. said the strategists of ING.

See also: Russian invasion of Ukraine will reduce oil and gas consumption while accelerating transition to cleaner fuels, says BP

However, Stephen Innes, managing partner at SPI Asset Management, said Iran’s oil production facilities are mostly located in the country’s southwest and were not targeted in the ongoing attacks.

He also noted that Iran is a “marginal” global exporter of crude oil and any significant disruption could be “offset by OPEC’s new spare capacity.”

Natural gas futures, meanwhile, have stabilized at their lowest level since April 2021, with US forecasts for warmer weather in the East Coast and parts of the central regions, said Victoria Dircksen, commodity analyst at Schneider Electric. in a daily note. Natural gas prices had stabilized on Thursday at their lowest since May 2021 and posted a sixth consecutive weekly loss on Friday.

Warmer weather is likely “to lead to weaker weather-driven demand and further support the likelihood of storage levels finishing the winter season surplus to the five-year average,” Dircksen said.

-Myra P.Saefong

(END) Dow Jones Newswires

01-30-23 1510ET

Copyright (c) 2023 Dow Jones & Company, Inc.

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