Oil Prices Dip Ahead of Fed Rate Decision
Crude oil prices dipped on Tuesday as traders await the U.S. Federal Reserve’s decision on interest rates, due out on Wednesday and as bearishness prevails after the latest data out of China.
That data included stronger-than-expected growth in industrial activity in China but it was accompanied by slower-than-expected growth in retail sales. This basically failed to change the dominant sentiment on oil markets, with a profit-taking session following last week’s price jump extending into general bullishness.
China’s industrial production rose by 5.4% in November, which was an improvement on the October rate of 5.3%, the data showed. However, retail sales increased at a rate of 3% last month, which was a palpable slowdown from October’s rate of 4.8%. That slowdown appears to have been enough to make oil traders pessimistic again.
At the time of writing, Brent crude was trading at $73.67 per barrel and West Texas Intermediate was trading at $70.37 per barrel, both down modestly from Monday’s close.
“I’m surprised crude isn’t testing $71 and the lows of its multi-month range,” one analyst from Pepperstone Group told Bloomberg. “The news flow is certainly keeping oil traders maintaining a preference to fade rallies,” Chris Weston, head of research at the company, also said.
The other issue in the focus of oil traders is the Fed monetary policy meeting this week, which is widely expected to produce another rate cut. The only unclear part is how big the cut would be.
“A 25 basis point cut has already been priced in by the market, so any surprises (from the Fed meeting) may move the market,” LSEG analyst Anh Pham told Reuters.
Separately, the latest, 15th package of EU sanctions against Russia failed to produce any effects on prices due to the fact that most Russian oil is being exported on non-EU vessels. A move by EU countries to step up insurance checks of these vessels when they traverse EU waters has also failed to move oil prices.