Oil Prices Under Pressure Ahead Of Fed Meeting

• Oil prices were trading lower early on Monday morning, with WTI falling below $70 and Brent dropping below $74.
• The upcoming meeting of the U.S. Federal Reserve has analysts on edge about another potential interest rate hike.
• In a sign of growing bearish sentiment, Goldman Sachs revised down its price outlook for crude oil for the rest of the year.

Crude oil prices began this week with by falling further, with West Texas Intermediate slipping below $70 in pre-noon trade in Asia.

Both benchmarks shed more than 1% in Asian trade earlier today as traders took a cautious approach to the possibility of the Federal Reserve announcing yet another rate hike, even though there were signals it may pause the hikes.

Most investment banks appear to expect a pause, Reuters noted in a report earlier today. The report quoted, however, a Morgan Stanley analyst as saying that "We maintain our call for a soft landing in the U.S., but policy could tighten further if growth does not slow, and funding pressures in the banking system keep risks skewed to the downside." 

"Oil prices are caught in a clash between two opposing forces, bearish asset allocators who point to monetary contraction and bullish oil speculators expecting lower inventories in 2H23," Francisco Blanch from Bank of America Global Research said in a note quoted by Reuters.

Goldman Sachs meanwhile revised down its price outlook for crude oil for the rest of the year. The bank now expects Brent crude to end 2023 at less than $90 per barrel, the Financial Times reported, citing expectations of weaker demand.

The bank cited expectations of higher supply from Russia, Iran, and Venezuela for next year as well, with additional production of 800,000 bpd. That would offset the additional cuts Saudi Arabia announced at the last OPEC+ meeting, should the kingdom decide to extend these into next year.

The size of the cuts was 1 million bpd but while Saudi cuts, the UAE was given the green light to boost its output by up to 200,000 bpd. At an Arab-China summit during the weekend, energy minister Abdulaziz bin Salman said the latest adjustments in OPEC+ production were an attempt to address "uncertainities and sentiment" in the oil market.

By Irina Slav for Oilprice.com

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