Oil prices edged lower on Monday ahead of a Fed meeting as investors try to gauge the central bank's appetite for further rate hikes.
"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," Bank of America Global Research's Francisco Blanch said in a note.
"The bearish allocators will maintain the upper hand for now, as oil prices struggle to rally until the Fed eases money supply," Blanch said. The bank still expects Brent crude to average about $80 a barrel in 2023.expect the U.S. central bank to leave interest rates unchanged when it concludes its two-day monetary policy meeting on Wednesday.
On supply, despite Saudi Arabia's pledges to cut oil production four times in the past year, Russian supply has held up as sanctions were engineered in a way to have less of an impact on output, Blanch said.have grown despite the implementation of the European Union's embargo and the Group of Seven's price cap mechanism that started in early December.
The bank's December crude price forecast now stands at $86 a barrel for Brent, down from $95, and at $81 a barrel for WTI, down from $89.
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