After adding 1.5% last week, Brent crude started this week with a dip and so did WTI, which last week gained 2%.
The dip comes ahead of central bank updates due in the United States and Europe, as traders calculate the chances for more rate hikes down the road.
"While another Fed rate hike this week may drive some short-term price volatility, we expect tightening market conditions on OPEC's supply cuts and increasing market speculation of further stimulus in China to continue to push prices higher through 3Q23," Reuters quoted analysts from National Australian Bank as saying.
Expectations of a Fed rate hike may be putting some pressure on the market but this hike should already be largely priced in," Warren Patterson, head of commodities strategy at ING, told Bloomberg.
"Ultimately, we believe oil prices will break out to the upside given the tightening fundamentals. However, there is some strong technical resistance nearby in the short term, in the form of the 200-day moving average."
Fears of more rate hikes and the possibility of a recession as a result of these hikes have held back many oil traders from buying the commodity even though demand has been stable and robust while supply has been constrained.
Despite these generally bullish fundamentals, as noted by ING's Patterson, traders have remained unconvinced, watching central bank announcements instead.
Bloomberg reported earlier today that expectations are for another hike to be announced at the next Fed meeting, which is taking place on Tuesday and Wednesday. The outlet also suggested there would be more hikes later in the year.
On the bullish side, Reuters reported that many traders are looking forward to the Chinese government introducing stimulus measures to accelerate the country's growth rate. This would boost already strong oil demand in China, countering the effect of recession fears.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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