US Federal Reserve chairman, Jerome Powell, has warned that interest rates will continue to rise amid high inflation, while the euro continues to trade near parity against the US dollar.
This is just oil prices fluctuated last Friday. Brent, the benchmark for two thirds of the world’s oil, traded 0.83% lower at $98.52 a barrel at 6.46pm UAE time.
West Texas Intermediate, the gauge that tracks US crude, was down 1.19% at $91.42 a barrel.
“Reducing inflation is likely to require a sustained period of below-trend growth,” said Mr. Powell at the annual gathering in Wyoming.
He posited that the US economy would need a tight monetary policy “for some time” to beat record-high inflation.
“These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain,” he said.
Oil prices have been volatile this year, with Brent shooting to about $140 a barrel in March after the outbreak of Russia’s war in Ukraine and subsequent supply concerns.
The West and their allies imposed graduated sanctions on Russia, the world’s second-largest energy exporter, for its invasion of Ukraine.
Strategists at Swiss bank UBS said last weekend that oil prices could rebound to $125 in the coming months due to tight market supply, declining spare capacity and low oil inventories.
They said the latest remarks by Saudi Energy Minister Prince Abdulaziz bin Salman, – about a disconnect between the price of oil futures and market fundamentals, and the fact that OPEC+ has the means to deal with market challenges, including cutting production at any time, – suggested that there was “a desire to defend oil prices to stay above the level of $90 per barrel”.
Market fundamentals, spare capacity below 2 million barrels per day and oil inventories at a multi-year low all support higher prices, the authors said.
Demand for crude outside the Organisation for Economic Co-operation and Development, whose members account for 54 per cent of total demand globally, remains strong.
On September 5, OPEC+ alliance of 23 oil producers, led by Saudi Arabia and Russia, will meet to assess the market and future production levels.
The producer group agreed earlier this month to raise production by another 100,000 bpd next month amid pressure from major consumers, including the US, to cool prices.
It had previously increased output by 648,000 bpd in July and August as part of measures to unwind about 10 million bpd of cuts introduced in May 2020 to counter the demand slump caused by the coronavirus pandemic.
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