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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Oil Prices Fall As Traders Anxiously Await Fed’s Decision

Oil prices dropped early on Monday as the U.S. dollar continues to strengthen ahead of the Fed’s much-anticipated policy meeting this week, which could announce the beginning of stimulus easing.

As of 9:05 a.m. EDT, WTI Crude was losing 1.75% at $70.71 and Brent Crude prices were down 1.49% at $74.21.

The oil market is down for a second consecutive day after Friday’s session settled in the red, as broader markets are anxiously watching whether the Federal Reserve will announce the start of asset purchase tapering at its meetings on Tuesday and Wednesday. The U.S. dollar gains were depressing the oil market as a stronger greenback makes oil buying more expensive for holders of other currencies.

The risk to U.S. oil production in the Gulf of Mexico is now diminishing as more output is being restored in the wake of Hurricane Ida. The return of more production from the U.S. offshore also weighed on oil prices early on Monday.

“As this week starts, much of the US market tightening on account of Ida is already baked into prices, while outages in offshore oil production and Louisiana refining capacity are continuing to ease,” Vanda Insights said in a note early on Monday.

The U.S. dollar and the Fed meeting will be the key external factors that will determine oil’s direction this week, apart from the usual U.S. inventory reports by the API and EIA, ING strategists Warren Patterson and Wenyu Yao say.

“All eyes will be on the FOMC meeting on Wednesday, where some believe we could already see the Fed announce its intentions to start tapering asset purchases, though our US economist is of the view that an announcement is more likely in November. A tapering announcement this week would likely put some downward pressure on oil and the broader commodities complex,” they noted.

“Last week the rally was halted at $76, the July 29 high, and more importantly it has raised the question whether current and improving fundamentals are strong enough to warrant a push above trendline resistance from the 2008 record peak, currently at $77,” Saxo Bank’s strategy team said in a Monday note.

“We don’t believe they are, therefore, leaving the market at risk of a short-term pull back, initially towards the 21-day moving average $72.75,” they added.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on September 20 2021 said:
    The fundamentals of the global oil market are robust enough to even overcome any decision by the Federal Reserve to start tapering asset purchases.

    Oil prices are on an upward trajectory aided by the global price rally of natural gas so they will brush aside any bearish influence from decisions by the Federal Reserve.

    Brent crude price is expected to hit $80 a barrel before the end of the year and average $71-$72 in 2021 with global oil demand hitting 99-100 million barrels a day (mbd).

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • George Doolittle on September 20 2021 said:
    All eyes on "crazy election in Canada." Most of the Louisiana refinery complex is back on line but of course most Gulf of Mexico oil...arguably the most economic oil on Earth to produce...remains off line.

    That is obviously long term very bearish for US oil prices though obviously in the short term good for "A" price support but one of very few.

    Somebody bought the dip big time today despite a very unsurprising market sell off today.

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