- The US Federal Reserve begins a two-day meeting on Tuesday
- Oil prices will rise towards the end of the year – Gunvor CEO
- US crude stocks set to fall in weekly reports
HOUSTON (Reuters) – Oil rose on Tuesday, extending the recovery from a 15-month low hit the previous day as the Credit Suisse bailout allayed fears of a banking crisis that would hurt economic growth and reduce fuel demand .
A raft of measures to stabilize the banking sector, including a UBS takeover of Credit Suisse and pledges by major central banks to increase liquidity, have helped reassure investors after uncertainty over the financial system rattled markets last week.
“Fear of a banking crisis and recession has receded, brightening the oil demand outlook, at least for now,” said Fiona Cincotta, senior financial markets analyst at City Index.
Brent crude was up 50 cents, or 0.7%, at $73.29 a barrel by 12:40 p.m. ET (16:40 GMT). US West Texas Intermediate (WTI) was up 84 cents, or 1.2%, to $68.48.
“A ‘risk-back-on’ sentiment appears to be returning in crude oil as the recent sell-off may very well have been over-the-top liquidation,” said Dennis Kissler, BOK Financial’s senior vice president of trading.
The Federal Reserve started its monetary policy meeting on Tuesday. Markets are expecting a 25 basis point rate hike, down from the previous 50 basis point hike. Some leading central bank observers have said the Fed could hold off further rate hikes or delay the release of new economic forecasts.
The dollar index slipped a day after hitting a five-week low. A weaker dollar makes oil cheaper for buyers holding other currencies, which can boost demand.
Wall Street’s main indices rose after the Credit Suisse bailout.
A meeting of OPEC+ ministers, which includes members of the Organization of the Petroleum Exporting Countries (OPEC) as well as Russia and other allies, is scheduled for April 3. OPEC+ sources told Reuters that the fall in prices reflects fears among banks rather than a deterioration in the supply-demand balance.
Hedge fund manager Pierre Andurand agreed that the recent price decline was speculative and not based on fundamentals. He predicted that oil will hit $140 a barrel by the end of the year.
Energy trader Gunvor CEO Torbjorn Tornqvist said he expects oil prices to rise towards the end of the year as rising Chinese demand tightens oil balances further.
Attention now turns to the American Petroleum Institute’s inventory report, which is due at 4:30 p.m. EDT (2030 GMT). A Reuters poll expects lower crude and product inventories.
“The damage from the financial sector has yet to subside, and traders will look for confirmation that US demand will not contract significantly,” BOK Financial’s Kissler said.
Additional reporting by Muyu Xu in Singapore; Edited by Barbara Lewis, Bernadette Baum and David Gregorio
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