Oil Rises After 3-day Losses on Tighter Supply

Oil traded higher early on Monday following three days of losses as tight supply continues to compete with recession fears ahead of a sharp rise in US interest rates expected to be announced this week by the Federal Reserve.

West Texas Intermediate crude for September delivery was last seen up $1.35 to US$96.05 per barrel, while September Brent crude, the global benchmark, was up $1.18 to $104.38.

The rise comes as demand remains tight despite concerns over US gasoline demand as high prices keep drivers off the roads, though Bloomberg reports physical markets to remain undersupplied, with premiums offered over the futures price for prompt delivery.

However, recession worries remain top of mind for traders ahead of this week’s two-day meeting of the Federal Reserve’s policy committee that is expected to end on Wednesday with a second-straight 75-basis point rise in US interest rates.

“With the FOMC meeting scheduled for this week, expectations are that the Fed will continue to guide for aggressive rate hikes to bring inflation under control, suggesting more room for USD gains and further fears of demand destruction,” Saxo Bank noted.