Oil steadies ahead of Fed decision while demand concerns persist

Oil was little changed as global markets await a widely expected interest-rate cut by the Federal Reserve this week.

Brent traded near $73 a barrel after rising by 1.6% on Monday, while West Texas Intermediate was above $70. Opinion remains divided on the Fed’s easing path, but some are wagering it will start with a half-point cut on Wednesday. Lower rates would likely provide bullish tailwinds for energy demand.

Oil has lost around 15% this quarter on China’s economic slowdown and signs of plentiful supply. Positioning of trend-following commodity trading advisers is close to their maximum short positions after a recent price slump, according to EA Quant Analytics, which may ease selling pressure.

EA Quant Analytics, which may ease selling pressure.

“The market currently overemphasizes bearish drivers,” BNP Paribas analyst Aldo Spanjer wrote in a note. A correction may emerge “towards the back end of the year, when draws pick up again on returning refining capacity and year-end destocking in the US picks up, highlighting the issue of low stocks.”

In Europe, major oil refineries are cutting how much crude they process at their plants, adding to bearish headwinds. The region is also facing competition from a new mega refinery in Nigeria, that’s in the process of firing up. – moneyweb.co,zw