Oil rises in choppy trade, Fed hike weighs

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

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  • The US Federal Reserve will hold its policy meeting on July 26-27
  • Libya plans to increase oil production to 1.2 million barrels per day within two weeks – NOC
  • EU adjusts sanctions to open Russian oil deals with third countries
  • Russia will not supply oil to countries that impose price ceilings – Central Bank

LONDON (Reuters) – Oil prices rose on Monday in swing trading as the market balanced supply concerns with expectations that a US interest rate hike would dampen demand for fuel.

Brent crude futures for September settlement rose 79 cents, or 0.77 percent, to $103.99 a barrel by 1050 GMT, while US West Texas Intermediate crude futures rose 82 cents, or 0.87 percent, to $95.52 a barrel.

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

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Oil futures have been volatile in recent weeks as traders have tried to juggle the prospects of an interest rate hike, which could limit economic activity and thus reduce fuel demand growth, against a supply shortage from disruptions in the circulation of Russian barrels due to Western sanctions amid the crisis. The conflict in Ukraine.

“Globally rising recession fears suggest that gains are likely to be limited in the short term, regardless of geopolitics,” said Jeffrey Haley, senior market analyst at OANDA.

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

China, the world’s second-largest economy, barely missed the contraction in the second quarter, posting just 0.4% year-over-year growth, weighed down by the COVID-19 lockdown, weak real estate and cautious consumer sentiment. Read more

But the sharp premium for the front month compared to the second month continues to indicate short-term supply tightness. The spread settled at $4.82 a barrel on Friday, its highest level ever when excluding expiration-related rallies in the previous two months.

Libya’s National Oil Corporation said it aims to restore production to 1.2 million barrels per day within two weeks, from about 860,000 barrels per day.

But analysts expect Libya’s production to remain volatile as tensions remain high. Read more

Continued supply shortages come after “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,” said Warren Patterson, head of commodities. Strategy at 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

But the governor of the Russian Central Bank, Elvira Nabiullina, said on Friday that Russia would not supply oil to countries that decided to impose a price ceiling on its oil. Read more

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

Our Standards: Thomson Reuters Trust Principles.

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