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Investors expect the Federal Reserve to raise rates by 25 basis
points on Wednesday, followed the day after by half-point hikes
from the Bank of England and European Central Bank, and any
deviation from that script would be a shock.
"The risk-off cautious mood in the market ahead of the central
bank meetings is hurting risk assets, including oil," said Fiona
Cincotta, analyst at City Index.
Brent crude rose 20 cents, or 0.2%, to $86.86 a barrel by 1110
GMT while U.S. West Texas Intermediate crude added 8 cents, or
0.1%, to $79.76.
"The upcoming flurry of price catalysts sets the stage for
significant swings in oil prices this week," said Stephen
Brennock of PVM. "That said, prices are unlikely to fall below
$80 and will struggle to get close to $100."
The market also came under pressure from indications of strong
Russian supply, despite an EU ban and G7 price cap imposed over
its invasion of Ukraine. Both oil benchmarks last week saw their
first weekly loss in three.
Besides the central bank meetings, a gathering on Wednesday of
key ministers from the Organization of the Petroleum Exporting
Countries and allies led by Russia, known as OPEC+, will also be
in focus.
The OPEC+ panel meeting on Wednesday is unlikely to tweak oil
output policy - although PVM said it could surprise with a small
cut.
Oil rose earlier on Monday amid tensions in the Middle East
following a drone attack in oil producer Iran.
While it is not clear yet what's happening in Iran, any
escalation there has the potential to disrupt crude flow, said
Stefano Grasso, a senior portfolio manager at 8VantEdge in
Singapore.
Hopes of a rise in Chinese demand have boosted oil in 2023. The
world's biggest crude importer pledged over the weekend to
promote a consumption recovery which would support demand.
(Additional reporting by Florence Tan and Emily Chow; Editing by
Louise Heavens)
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