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Oil rises $2 as dollar eases, market wary of Fed

Commodities Jul 25, 2022 03:15PM ET
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By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices rose about $2 on Monday, bolstered by supply fears, a dip in the U.S. dollar and early strength in equity markets, but prices seesawed as some worried fuel demand could weaken if the Federal Reserve raises U.S. interest rates too aggressively.

Brent crude futures for September settled up $1.95, or 1.9%, at $105.15 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose $2, or 2.1%, to settle at $96.70 a barrel.

"A slightly weaker U.S. dollar and improving equity markets are supporting oil," UBS oil analyst Giovanni Staunovo said. After early strength, U.S. stocks moved lower in afternoon trading, with investors cautious about the Fed meeting this week and earnings from several growth companies.

Oil futures have been volatile in recent weeks, pressured by worries that rising interest rates could slow economic activity and fuel demand but supported by tight supply, especially since Russia's invasion of Ukraine and Western sanctions on Moscow.

"The U.S. and European economies are slowing and with the Federal Reserve set to raise interest rates again this week, traders remain very cautious," said Dennis Kissler, senior vice president of trading at BOK Financial.

Fed officials have indicated the U.S. central bank would likely raise rates by 75 basis points at its July 26-27 meeting.

China, the world's second-biggest economy, narrowly missed a contraction in the second quarter, growing just 0.4% year-on-year.

But a steep front-month premium over the second month continues to signal near-term supply tightness. The spread settled at $4.82/bbl on Friday, an all-time high when excluding expiry-related spikes in the two previous months.

Libya's National Oil Corporation (NOC) said it aimed to bring back production to 1.2 million barrels per day (bpd) in two weeks, from around 860,000 bpd.

But analysts expect Libya's output to remain volatile as tensions remained high after clashes between rival political factions over the weekend.

Prices drew support from "expectations that Russian oil supply will edge lower in the months ahead as widely-expected plans for a price cap on Russian oil may have the opposite effect on oil prices than hoped for," said Warren Patterson, head of commodities strategy at ING.

The European Union said last week it would allow Russian state-owned companies to ship oil to third countries under an adjustment of sanctions agreed by member states last week aimed at limiting the risks to global energy security.

On Friday, Russian Central Bank Governor Elvira Nabiullina said Russia would not supply oil to countries that imposed a price cap on its oil.

Russia's Gazprom (MCX:GAZP) said flows through Nord Stream 1, Russia's single biggest gas link to German, would fall to 33 million cubic metres per day, just 20% of capacity, from 0400 GMT on Wednesday.

That could lead to additional switching to crude from gas, supporting oil prices, said Andrew Lipow of Lipow Oil Associates in Houston.

Oil rises $2 as dollar eases, market wary of Fed
 

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Comments (7)
Guido Martini
Guido Martini Jul 25, 2022 7:48AM ET
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Ours leaders are not thinking well, that war in Ukraine never should have begun and just finished yet. Fire them!
Jeff Chevalier
Jeff Chevalier Jul 25, 2022 7:48AM ET
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And exactly how much control over Russia do you think the US has?
David Bodah
David Bodah Jul 25, 2022 7:48AM ET
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Jeff Chevalier -We have none. I believe Russia will prove to be a fully self sustaining nation.We should focus more on controlling ourselves.
Ravi Kiran
Ravi Kiran Jul 25, 2022 7:48AM ET
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FIRE THEM nice Massmurder... Model Christian
Captain ffej snori
Captain ffej snori Jul 25, 2022 1:00AM ET
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150 EOY
Francis Lim Wei
Francis Lim Wei Jul 25, 2022 12:06AM ET
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talk yourself out of recession and live in dillusional..this bubble is bursting
Zhikang Sim
Zhikang Sim Jul 24, 2022 11:29PM ET
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another rubbish writing
Jim Herndon
Jim Herndon Jul 24, 2022 11:22PM ET
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HaHa, that’s a good one
Royce Murph
Royce Murph Jul 24, 2022 11:08PM ET
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Another Dem written article. Pathetic.
Jeff Chevalier
Jeff Chevalier Jul 24, 2022 11:08PM ET
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Were the words too big? Not enough yee-ha's?
Brad Albright
Brad Albright Jul 24, 2022 11:08PM ET
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Too many facts? Not enough racism?
Hai Qing
Hai Qing Jul 24, 2022 10:46PM ET
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Russian is producing oil which is not enough for China.
 
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