Bargain hunting lifted oil prices on Tuesday, but investors remained cautious ahead of crucial Fed and central bank policy meetings.
By 0340 GMT, Brent crude futures rose 52 cents, or 0.7%, to $72.34. WTI crude rose 35 cents to $67.47.
Both benchmarks dipped roughly $3 a barrel on Monday after experts noted expanding global supplies, concerns about demand growth ahead of critical inflation data, and a two-day Fed monetary policy meeting ending on Wednesday.
“Some investors looked for bargains after the previous day’s heavy selling while others held back their positions with speculation that Saudi Arabia may cut production further,” said Nomura Securities senior economist Tatsufumi Okoshi.
He predicted WTI would trade between $62.50 and $75 a barrel during the summer, mostly below $70, due to China’s slowing economic recovery.
Market participants expect the Fed to maintain interest rates at its policy meeting. The Fed’s rate hikes have boosted the dollar, raising costs for dollar-denominated commodities.
To curb inflation, the European Central Bank is anticipated to raise interest rates by another quarter percentage point on Thursday. However, Friday’s Bank of Japan plan is expected to retain its ultra-loose policy.
Last week’s poor economic data in China prompted concerns about demand growth in the world’s largest crude importer, countering Saudi Arabia’s plan to reduce 1 million barrels daily in July.
Nomura’s Okoshi said the market awaits Tuesday’s OPEC and IEA demand outlooks.
“In our view, the latest fall in oil prices increases the probability Saudi Arabia will at least extend supply cuts currently in place for July,” National Australia Bank analysts wrote.
“On this basis, market speculation on the potential for further supply cuts at the next OPEC meeting is likely to drive oil price volatility.”
Last week, Saudi Arabia lowered its July output by 1 million barrels per day (bpd) to 9 million bpd, its biggest cut in years, to increase prices.
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