Oil Dips Ahead of Fed Rate Decision After Two-Day Relief Rally

(Bloomberg) -- Oil dipped ahead of an interest-rate decision from the Federal Reserve following a two-day rally that was driven by an easing of concern over banking crises in the US and Europe. 

West Texas Intermediate futures traded near $69 a barrel after rising almost 4% over the previous two sessions, as US officials studied ways they might temporarily expand protection for all deposits. Markets are pricing in a roughly 80% chance that the Fed will hike rates by a quarter point on Wednesday.

The banking turmoil drove oil to a 15-month low last week and whipped up volatility across global markets. A raft of market watchers remain bullish on the outlook, in part due to China’s rebound from Covid curbs, with predictions for prices in the second half ranging between $80 and $140 a barrel.

Russian has decided to keep its output at a reduced level through June, taking into account the current situation, Deputy Prime Minister Alexander Novak said. The nation pledged to cut its production by 500,000 barrels a day in March.

“The rally in crude oil prices is taking a breather ahead of the FOMC announcement,” said Charu Chanana, a market strategist for Saxo Capital Markets Pte. Still, futures remain supported by US measures toward covering all deposits and Russia extending its output cut, she added.

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