Market Analysis

WTI, the US crude oil benchmark, is trading near $79.90 on Wednesday, experiencing a decline due to increased demand for the US Dollar and hawkish comments from the Federal Reserve. 

Recent remarks from Fed officials, including Neel Kashkari of the Minneapolis Fed, have emphasized caution on interest rate cuts until significant progress is made on inflation, reinforcing expectations of sustained higher US interest rates. This narrative has pressured oil prices by raising borrowing costs, potentially dampening economic activity and oil demand.

Looking ahead, OPEC and its allies, including Russia (OPEC+), are set to meet virtually on June 2 to review their production policy. Analysts anticipate OPEC+ will likely maintain current production cuts of 2.2 million barrels per day, aiming to stabilize prices amid concerns. According to Deutsche Bank's Michael Hsueh, the reluctance to increase production reflects current Brent prices around $80 per barrel rather than $90 per barrel.

Additionally, the International Monetary Fund (IMF) has raised China's 2025 economic growth forecast to 4.5% from 4.1%, a development that could support WTI prices. China, the largest non-OECD oil consumer, accounting for 80% of global imports, remains pivotal in influencing global oil demand dynamics.

Paraphrasing text from "FX Street" all rights reserved by the original author.