Oil rises in volatile trade, Fed hike weighs

Oil pump cylinders are seen at the Vaca Muerta shale oil and gas field in the Patagonian province of Neuquen, Argentina January 21, 2019. REUTERS/Agustin Marcarian/File Photo

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  • The US Fed will hold a policy meeting on July 26-27
  • Libya to boost oil production to 1.2m bpd in 2 weeks – NOC
  • EU modifies sanctions to unblock Russian oil deals with third countries
  • Russia won’t supply oil to countries that impose price caps – c.bank

LONDON, July 25 (Reuters) – Oil prices rose in seesaw trading on Monday as the market balanced supply fears with expectations that a rise in U.S. interest rates would weaken demand for fuel.

Brent crude futures for September settlement rose 79 cents, or 0.77%, to $103.99 a barrel at 10:50 GMT, while US West Texas Intermediate crude futures ( WTI) rose 82 cents, or 0.87%, to $95.52 a barrel.

“A slightly weaker US dollar and improving stock markets are supporting oil,” Giovanni Staunovo, oil analyst at UBS, said Monday.

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Oil futures have been volatile in recent weeks as traders have tried to reconcile the possibilities of further interest rate hikes, which could limit economic activity and therefore reduce fuel demand growth, with a tight supply due to disruptions in Russian barrel trade due to Western sanctions amid the Ukrainian conflict.

“Rising recession fears globally suggest that gains are likely to be limited in the near term, geopolitics aside,” said Jeffrey Halley, senior market analyst at OANDA.

Fed officials said the central bank would likely raise rates by 75 basis points at its July 26-27 meeting.

China, the world’s second-largest economy, narrowly missed a contraction in the second quarter, growing just 0.4% year-on-year, weighed down by COVID-19 shutdowns, a weak real estate sector and cautious consumer sentiment. Read more

But a strong first-month premium over second-month continues to signal tighter near-term supply. The spread settled at $4.82/bbl on Friday, an all-time high when excluding the expiration-related spikes over the previous two months.

Libya’s National Oil Corporation (NOC) has announced its aim to bring production back to 1.2 million barrels per day (bpd) in two weeks, from around 860,000 bpd.

But analysts expect Libyan output to remain volatile as tensions are still high. Read more

The continued tight supply also comes on the heels of “expectations that Russian oil supply will decline slightly in the coming months, as the widely expected plans for a Russian oil price cap could have the opposite effect on oil prices than expected,” said Warren Patterson, chief commodities officer. strategy at ING.

The European Union said last week it would allow Russian state-owned companies to ship oil to third countries as part of an adjustment to sanctions agreed by member states last week aimed at limiting security risks global energy. Read more

However, Russian Central Bank Governor Elvira Nabiullina said Friday that Russia will not supply oil to countries that have decided to impose a price cap on its oil. Read more

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Additional reporting by Yuka Obayashi in Tokyo; edited by David Evans and Louise Heavens

Our standards: The Thomson Reuters Trust Principles.

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