Oil prices drop 4% ahead of US Federal Reserve meeting

Oil prices settled down around $3 a barrel on Monday, after analysts highlighted rising global supplies and concerns about demand growth, ahead of key inflation data and the Federal Reserve’s meeting this week.

Brent crude futures fell by $2.95, or 3.9%, to settle at $71.84 a barrel, its lowest level since December 2021.

West Texas Intermediate crude fell by $3.05, or 4.4%, to settle at $67.12 per barrel.

Goldman Sachs cut its oil price forecast on Sunday morning, due to higher-than-expected supplies from Russia and Iran. The bank’s forecast for Brent crude for December is now $86 per barrel, down from 95, and $81 per barrel for WTI, down from 89.

The review comes at the start of a busy week during which the US central bank meets and is expected to leave interest rates unchanged for this month. But investors are concerned that the bank may resume raising interest rates from next month, according to Robert Yawger, an analyst at UBS.

Higher interest rates boost the greenback, making dollar-denominated commodities more expensive for holders of other currencies, and putting pressure on prices.

Demand from China, the world’s largest importer of crude oil and refined products, has yet to grow, which is also worrying investors.

This may lead to lower demand forecasts by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency. Both organizations will issue their monthly market report on Tuesday.

And the two benchmarks suffered a second consecutive weekly loss last week, after disappointing Chinese economic data raised concerns about demand growth in the world’s largest importer of crude, which outweighed the price recovery due to Saudi Arabia’s decision to cut production by one million barrels per day in July.

(Reuters)