Pakistan Oil & Gas_Has the crude oil weakness ended, (AKD Daily, Dec 14, 2022)
Has the crude oil weakness ended?
Brent oil prices have been on a downward trend since the beginning of this month, with
the active future falling by as much as 10.9% to reach a low of US$76.10/bbl in the month,
reached on December 09, 2022.
Brent prices have rebounded since then by 6.0%, with the recent strength driven by US CPI
data leading to expectations of a slowdown in the pace of tightening in the benchmark
rates. To note, Nov’22 CPI clocked in at 7.1% in the US, compared to the earlier month’s
7.7% and readings north of the 8% mark consistently between Mar’22 to Sep’22.
The Federal Open Market Committee’s (FOMC) last meeting for the year 2022 commenced
yesterday, wherein the market would be eagerly eyeing the quantum of the hike, with the
incoming CPI data setting the expectation of a milder policy stance this time around.
Ahead of the meeting, market participants are eyeing a 50bps increase in rates.
Strength in prices during yesterday’s trade were short-lived following preliminary inventory data from the API, which showed a 7.8mn bbls draw last week—indicating supply outpacing demand and pressuring prices.
EIA has revised its estimates to indicate the economic slowdown in the US to be milder
than earlier expected, with economic recovery expected to start from 1QCY23. Furthermore, with the Russian oil cap introduced at US$60/bbl, the country is expected to withdraw its production from the international arena, which could further support prices
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