NEW YORK: Oil prices fell by around US$3 a barrel on Monday (June 12) after analysts highlighted rising global supplies and concerns about demand growth just ahead of key inflation data and a US Federal Reserve (Fed) meeting later this week.
Brent crude futures fell US$2.95, or 3.9%, to settle at US$71.84 (RM331.72) a barrel, their lowest since December 2021. West Texas Intermediate (WTI) crude fell US$3.05, or 4.4%, to settle at US$67.12 (RM309.92) a barrel.
Goldman Sachs cut its oil price forecasts early on Sunday, citing higher-than-expected supplies later this year and through 2024. The bank's December crude price forecast now stands at US$86 a barrel for Brent, down from US$95, and at US$81 a barrel for WTI, down from US$89.
“Goldman capitulating on their bullish price forecast appears to have been the catalyst to kickstart selling today,” said Kpler analyst Matt Smith.
The revision comes at the start of a busy week for the Fed, which meets on Wednesday. While the Fed is expected to leave interest rates unchanged this month, investors are concerned that rate increases are likely to resume next month, said UBS analyst Robert Yawger.
The Fed’s rate increases have strengthened the dollar, making commodities denominated in the US currency more expensive for holders of other currencies and weighing on prices.
“The Fed meeting and inflation pressures remain key issues for the market this week,” said Rob Haworth, senior investment strategist at US Bank Asset Management.
“The more likely hold on interest rates means investors will closely track Fed chair Powell’s press conference for the expected path for interest rates,” he said.
Also weighing on investors’ minds, oil demand recovery has been muted in China, the top importer of crude oil and refined products.
“Chinese demand has shown no signs of materialising, and it could be as much as 2 million barrels a day, so it is a significant amount. There are definitely fears that Opec and IEA will cut their demand forecasts,” Yawger said.
The Organization of Petroleum Exporting Countries and the International Energy Agency will each release their monthly market updates on Tuesday.
Last week, both Brent and WTI posted a second straight weekly decline after disappointing Chinese economic data erased the price boost from Saudi Arabia's pledge to cut production in July. – Reuters