Oil prices dip on interest rate hike fears

October 04, 2023 (MLN): Oil prices dropped on Wednesday as the market considered the major central banks' outlook to keep interest rates higher for a longer period ahead of a panel meeting of OPEC+ ministers.

Brent crude is currently trading at $90.35 per barrel, down by 0.23% on the day.

While West Texas Intermediate crude (WTI) is trading at $88.09 per barrel, down by 0.31% on the day.

To note, Brent Crude and WTI, surged by 5.93% and 7.96% MoM, reaching $91.72 and $89.80, respectively in September.

Brent Crude, the major oil benchmark, is expected to drop to $70 a barrel by 2024 as the global market is expected to swing to surplus by next year, according to Citigroup's latest predictions.

Along with fears that interest rates will stay high for some time, oil benchmarks also have been pressured by concerns that the strengthening dollar would dent demand, as it makes oil more expensive for holders of other currencies, as Reuters reported.

"A resilient labor market is deemed to be providing more room for the Federal Reserve (Fed) to keep rates high for longer," said Yeap Jun Rong, market analyst at IG.

The Organization of the Petroleum Exporting Countries and Allies, or OPEC+, is expected to keep output policy unchanged when it meets on Wednesday after members Saudi Arabia and Russia extended output cuts to the end of the year.

Saudi Arabia is expected to raise its November official selling price of Arab Light crude to Asia for a fifth straight month, according to a Reuters survey, as market participants expect supplies of medium sour crude to remain tight.

"The recent oil price reversal could be a reason for the cartel to keep their supply cuts unchanged in today's review meeting," said ANZ Bank's analysts Brian Martin and Daniel Hynes in a note.

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