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The
market stumbled in overnight trade as firmer-than-expected U.S.
inflation readings for November bolstered the view the Federal
Reserve was unlikely to cut interest rates early next year,
which would weigh on consumption.
Meanwhile, weekly average Russian crude exports jumped to the
highest since July, ANZ analysts said, compounding oversupply
concerns and throwing doubt on the recent output cut agreement
by the Organization of the Petroleum Exporting Countries and
allies (OPEC+).
The U.S. Energy Information Administration raised its forecast
for supply in 2023 by 300,000 barrels per day from its previous
report to 12.93 million barrels per day.
The bearish outlook puts oil on track to decline for an eighth
straight week.
A policy meeting by the U.S. central bank that concludes later
on Wednesday will determine the direction of markets, said Tina
Teng, a market analyst with CMC Markets. "A more
hawkish-than-expected stance by the Fed may cause a further drop
in crude prices," Teng said.
The Fed is widely expected to keep rates on hold. However,
investors will focus on officials' views on the economy and
interest rates in the coming quarters.
Markets have priced in "aggressive rate cuts" for 2024, said
Yeap Jun Rong, market strategist at IG. "Any disappointment on
that front could strengthen the U.S. dollar and weigh on the
risk environment," pushing down oil prices, Yeap said.
Suvro Sarkar, an analyst at DBS, said the discussions were
unlikely to elicit surprises and that prices could recover
somewhat in a "relief rally" afterward.
The United Nations on Wednesday passed a resolution calling for
a ceasefire in Gaza, with President Joe Biden warning that
Israel was starting to lose international support because of
civilian deaths.
The cost of shipping through the Red Sea is also rising as the
Iran-aligned Houthis in Yemen have stepped up attacks on ships
they believe are connected to Israel, with industry sources
warning of disruptions.
Nearly 200 nations reached a historic deal to begin reducing the
global consumption of fossil fuels at the COP28 conference,
meant to send a signal to investors in oil and other fossil
fuels.
(Reporting by Colleen Howe; Editing by Jacqueline Wong and Shri
Navaratnam)
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