Prices Hold Onto Gains As Wait For Fed Announcement

Oil prices are in a holding pattern ahead of the Fed decision later. They have maintained gains driven by monetary stimulus in China and US plans to refill the SPR. WTI is remaining below $70 and is flat on the day at $69.45/bbl, close to the intraday high, and Brent has traded below $75 but is up 0.2% to $74.42.

• OPEC estimated in its monthly report on Tuesday that there will a crude shortfall of about 2.7mbd in July following Saudi Arabia’s announcement to cut output by a further 1mbd and based on a forecasted increase in global demand. Saudi Arabia is yet to say whether the move will be extended beyond July. The International Energy Agency’s monthly report is also released later. Previously it also expected the market to be in deficit in H2 2023. So, far these projections have done little to boost oil prices.
• Bloomberg reported that API recorded crude inventories rose 1.02mn barrels last week after a 1.7mn drawdown the previous week, according to people familiar with the data. Gasoline stocks rose 2.075mn and distillate +1.39mn. The official EIA data is published today.
• Later the Fed decision is announced and it is expected to keep rates on hold (see MNI’s Fed Preview here). An unexpected hike would likely drive oil prices sharply lower on US recession fears. There is also US PPI data for May, UK April IP/GDP and euro area IP.