Oil gained as the dollar weakened and equities rallied before interest-rate decisions by major central banks.
West Texas Intermediate futures climbed to trade near US$88 a barrel after losing around 3 per cent over the previous two sessions. The Federal Reserve is scheduled to make a decision on rates on Wednesday, as central banks continue to tighten monetary policy to tame inflation. Chinese stocks surged on speculation that policymakers are making preparations to exit COVID restrictions.
“If interest rates are going to move higher, then there's greater chance of a recession, and OPEC would be right to worry that it'll lead to further demand destruction,” said Vishnu Varathan, the Asia head of economics and strategy at Mizuho Bank Ltd. “That said, OPEC's bias is to keep supply tight, as high prices are an economic windfall that they're likely unwilling to give up.”WTI for December delivery rose 1.4 per cent to US$87.
Brent for January settlement gained 1.5 per cent to US$94.19 a barrel on the ICE Futures Europe exchange. Cuts by the Organization of Petroleum Exporting Countries and its allies will be followed by European Union sanctions on Russian crude flows, further clouding the supply outlook. Moscow has mostly failed to line up fresh markets for its oil before EU penalties take effect from Dec. 5.
A U.S.-led plan to cap the price of Russian oil sales, part of the broader international response to the invasion of Ukraine, will temporarily exempt shipments loaded before Dec. 5, according to the U.S. Treasury Department. Cargoes must be unloaded by Jan. 19 to qualify for exemption.
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