Oil Prices Rise to $85, Focus on U.S. Monetary Policy

Oil prices rose on Tuesday in international markets towards $85, supported by a weaker dollar and investor estimates that the U.S. central bank may be nearing the end of its interest rate hike cycle.

In the London market, the price of a barrel was 65 cents higher than yesterday’s closing, amounting to $84.83. In the U.S. market, barrels traded at a price 92 cents higher, at $80.66.

Support for prices today came from a weaker dollar, which enhances the purchasing power of buyers with other currencies, stimulating demand. The greenback weakened under the influence of investor estimates that the Fed is approaching the end of its interest rate hike cycle.

To better assess the prospects for a shift in U.S. monetary policy, investors are turning to the inflation report for March, which will be released on Wednesday.

– It will soon be clearer what the short-term outlook for oil is. This week we will find out whether the U.S. economy will enter recession step by step or sink like a stone – explains Edward Moya from OANDA.

– Wall Street should gain a clear insight into the trajectory of the economy after receiving the key inflation report – adds Moya.

Data from China showed that prices in March rose the weakest since September 2021, signaling continued weak demand amid an uneven economic recovery.

– Inflation in China in March was weaker than expected, which could prompt the Chinese government to provide additional stimulus for the economy – highlighted Tina Teng from CMC Markets.

– With a greater number of central banks pausing rate hikes, such as the Reserve Bank of Australia or the Bank of Korea… it has strengthened expectations that the Fed will further reduce tightening policy – added Teng.

Support for prices is also provided by the recent announcement from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, that they will reduce production by an additional 1.66 million barrels per day from May until the end of the year, in addition to the already agreed two million barrels per day.

Investors simultaneously expect stronger demand in France, following the reopening of a refinery that had been closed for weeks due to protests against raising the retirement age.

OPEC separately announced today that on Monday the price of a barrel of its members’ oil basket rose by 33 cents to $85.50.