Jun 15, 2022 03:06AM ET
By: AnalysisWatch
Oil prices rose on Wednesday, recovering from losses earlier in the session amid concerns about fuel demand and the broader economy ahead of an expected big interest rate hike by the US Federal Reserve.
In a volatile session, August Brent crude futures rose 46 cents, or 0.4 percent, to $121.63 a barrel as of 0642 GMT, after earlier falling as much as $120.65 on a 0.9 percent drop on Tuesday.
US West Texas Intermediate crude for July rose 41 cents, or 0.3%, to $119.34 a barrel, after earlier hitting a low of $118.22 and falling 1.7% the previous day.
Rising inflation has investors and oil traders bracing for a big move by the Fed this week - a 75 basis point hike, which would be the biggest rate hike in the US in 28 years.
If the Fed announces a 75 basis point rate hike tonight, oil prices could weaken significantly against the dollar in the short term, as a more aggressive stance by the Fed could cause investors to flee to the safe dollar and take a hit on risk-sensitive assets like oil.
On the demand side, the recent COVID outbreak in China, blamed on a 24-hour bar in Beijing, has raised fears of a new phase of closures.
However, the country's economy showed signs of recovery in May after slumping the previous month as industrial production unexpectedly rose.
In its monthly report, the Organisation of Petroleum Exporting Countries (OPEC) maintained its forecast that global oil demand in 2022 will exceed pre-pandemic levels.
Overall, the supply/demand situation remains tight and I cannot see this changing unless the global economy slows dramatically.
However, some support for prices is provided by tight supply, exacerbated by a drop in exports from Libya in the wake of a political crisis affecting production and ports.
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