Crude oil prices dipped earlier today after a relentless rally that brought benchmarks to a 10-month high earlier this week.
The dip was the result of profit-taking and a pause ahead of a Fed meeting that would discuss interest rates yet again.
At the time of writing, Brent crude was trading at around $92 per barrel, after topping $95 per barrel yesterday. West Texas Intermediate was trading at a little under $90 per barrel, after topping $92 on Tuesday.
"The oil rally is taking a little break as every trader awaits a pivotal Fed decision that might tilt the scales of whether the U.S. economy has a soft or hard landing," OANDA senior market analyst Edward Moya told Reuters.
ING, meanwhile, joined the chorus of analysts forecasting Brent’s return to $100 per barrel, “as the market continues to become increasingly concerned over the tightness in the oil balance for the remainder of the year,” the bank’s head of commodity strategy Warren Patterson and commodities strategist Ewa Manthey wrote in a note today.
Patterson and Manthey also noted this supply tightness was reflected in the forward curve on the futures market: “The curve is moving deeper into backwardation with the prompt Brent spread trading in a backwardation of close to US$1.20/bbl, up from just US$0.60/bbl at the start of last week,” they wrote.
In the U.S., oil prices have recently benefited from one extra bullish factor: the decline in crude oil inventories at Cushing, Oklahoma, which has brought total crude volumes there close to a critical minimum. The trading arm of TotalEnergies was reportedly buying up all the U.S. crude it could as a result of this tightness, sending the premium for physical U.S. crude surging.
Higher oil prices might interfere with Fed plans to stop its interest rate hikes. The Wall Street Journal noted in a report that higher oil prices would lead to higher energy bills - which would fuel inflation, which in turn could motivate the Fed to hike rates further.
By Irina Slav for Oilprice.com
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