Oil Dips Ahead of Fed Rate Decision After Two-Day Relief Rally

By Bloomberg

Mar 22, 2023

image is BloomburgMedia_RRVLI9T0AFB401_22-03-2023_05-21-01_638150400000000000.jpg

A gas flare at the Marathon Petroleum Galveston Bay Refinery in Texas City, Texas, US, on Tuesday, Aug. 2, 2022. Marathon Petroleum Corp., the largest US fuelmaker, made more money in the second quarter than in any of its previous years since becoming an independent refiner over a decade ago. Photographer: Mark Felix/Bloomberg

(Bloomberg) -- Oil dipped ahead of an interest-rate decision from the Federal Reserve following a two-day rally that was driven by an easing of concern over banking crises in the US and Europe.

West Texas Intermediate futures traded near $69 a barrel after rising almost 4% over the previous two sessions, as US officials studied ways they might temporarily expand protection for all deposits. Markets are pricing in a roughly 80% chance that the Fed will hike rates by a quarter point on Wednesday.

The banking turmoil drove oil to a 15-month low last week and whipped up volatility across global markets. A raft of market watchers remain bullish on the outlook, in part due to China’s rebound from Covid curbs, with predictions for prices in the second half ranging between $80 and $140 a barrel.

Russian has decided to keep its output at a reduced level through June, taking into account the current situation, Deputy Prime Minister Alexander Novak said. The nation pledged to cut its production by 500,000 barrels a day in March.

“The rally in crude oil prices is taking a breather ahead of the FOMC announcement,” said Charu Chanana, a market strategist for Saxo Capital Markets Pte. Still, futures remain supported by US measures toward covering all deposits and Russia extending its output cut, she added.

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By Yongchang Chin