Oil rises $2 as dollar slips, market wary of Fed

Oil pump cranes at the Vaca Muerta oil and shale gas field in the Patagonian province of Neuquén, Argentina, Jan. 21, 2019. REUTERS/Agustin Markarian/File Photo

HOUSTON (July 25) (Reuters) – Oil prices rose nearly $2 on Monday, boosted by supply concerns, a slump in the U.S. dollar and early strength in stock markets, but prices are on the swing with some worried that fuel demand could weaken if it lifted. United States Federal Reserve Board. Interest rates are very aggressive.

Brent crude futures for September settled up $1.95, or 1.9%, at $105.15 a barrel, while US West Texas Intermediate crude futures rose $2, or 2.1%, to settle at $96.70 a barrel.

“A little weaker dollar and improving stock markets are supporting oil,” said Giovanni Stonovo, oil analyst at UBS. (.stoxx)After the early strength, US stocks fell in afternoon trading, with investors wary of this week’s Federal Reserve meeting and earnings from several growth companies.

Oil futures have been volatile in recent weeks, influenced by fears that higher interest rates will slow economic activity and fuel demand, but with the support of tight supply, especially since the Russian invasion of Ukraine and Western sanctions on Moscow.

“The US and European economies are slowing, and with the Fed poised to raise interest rates again this week, traders remain very cautious,” said Dennis Kessler, senior vice president of trading at BOK Financial.

Federal Reserve officials indicated that the US central bank is likely to raise interest rates by 75 basis points at its July 26-27 meeting.

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But the sharp front month premium over the second month still points to tight supply in the near term. The spread settled at $4.82/barrel on Friday, its highest level ever when excluding expiry-related rallies in the previous two months.

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Warren Patterson, head of commodity strategy, said prices were supported by “expectations that Russian oil supplies will decline in the coming months, as widely expected plans to cap Russian oil prices may have a more adverse effect on oil prices than hoped.” in ING.

The European Union said last week that it would allow Russian state-owned companies to ship oil to third countries under an amendment to sanctions agreed by member states last week aimed at reducing risks to global energy security. Read more

Russia’s Central Bank Governor Elvira Nabiullina said on Friday that Russia would not supply oil to countries that have imposed a ceiling on its oil prices. Read more

Russia’s Gazprom said flows through Nord Stream 1, Russia’s largest gas link to Germany, will be reduced to 33 million cubic meters per day, or just 20 percent of its capacity, starting at 0400 GMT on Wednesday. Read more

That could lead to an additional shift to crude from gas, said Andrew Lipow of Lipow Oil Associates in Houston, supporting oil prices.

Additional reporting by Rowen Edwards in London and Yuka Obayashi in Tokyo. Editing by Margarita Choi and David Gregorio

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