Oil down on investor reticence ahead of US Fed meeting

Oil prices fell on Tuesday, as investor risk appetite was severely impacted by uncertainties over the US Fed’s monetary policy and global recession expectations, combined with worse-than-expected China industrial data.

International benchmark Brent crude traded at $79.14 per barrel at 09.54 a.m. local time (0654 GMT), a 0.21% decrease from the closing price of $79.31 a barrel in the previous trading session.

Simultaneously, the American benchmark West Texas Intermediate (WTI) traded at $75.50 per barrel, down 0.21% from the previous session’s close of $75.66 per barrel.

Overcautiousness ahead of the monetary policy decisions of the US Federal Reserve (Fed) on Wednesday is exerting downward pressure on prices.

The US Fed made a total of 425-point interest rate increases on seven occasions last year to fight record-high inflation that climbed to the highest level in over 40 years by mid-2022.

It later raised its benchmark funds rate by 25 basis points on Feb. 1, followed by another hike of 25 basis points on March 22, bringing it to a range of 4.75% to 5%.

If the Fed raises interest rates by another 25 basis points, as widely expected, demand concerns will worsen, feeding inflationary fears and driving down prices.

The lingering banking crisis is also weighing on prices, following reports that US regulators closed the troubled First Republic Bank, with JPMorgan Chase acquiring its assets, according to a statement issued by the Federal Deposit Insurance Corporation (FDIC) on Monday.

-China data disappoints investors

Meanwhile, worse-than-expected industrial data from China was another factor that raised market pressure on sales.

According to the National Bureau of Statistics on Sunday, China’s manufacturing activity unexpectedly contracted in April, raising doubts about the country’s post-COVID economic recovery.

The official manufacturing purchasing managers’ index (PMI) dropped below the 50-point threshold in April, shrinking to 49.2 from 51.9 in March, reaching its lowest position since China’s post-pandemic recovery late last year and falling short of the market estimate of 51.5.

• Federal Deposit Insurance Corporation (FDIC)