Oil prices were steady on Monday after falling nearly 1 per cent in early morning trade as the Opec+ alliance prepares to meet this week and markets await the results of a US Federal Reserve policy meeting.
Brent, the benchmark for two thirds of the world’s oil, was 0.23 per cent higher at $86.86 a barrel at 3.14pm UAE time.
West Texas Intermediate, the gauge that tracks US crude, was up 0.14 per cent at $79.79 a barrel.
Brent settled at about 1 per cent lower at $86.66 on Friday while WTI was 1.64 per cent down at $79.68.
“Opec+ ministers will meet for the joint ministerial monitoring committee to evaluate oil market conditions,” said Edward Bell, senior director of market economics at Emirates NBD.
“Given the improvement in oil prices in the last few weeks overall, the committee may recommend to keep output targets unchanged.”
The group, which consists of 23 oil-producing countries, stuck to a production cut of 2 million barrels per day in December amid uncertainty over crude sanctions on Russia.
The Fed, which will hold the year’s first policy meeting from January 31 to February 1, is expected to announce a smaller interest rate increase amid cooling inflation rates in the world's largest economy.
The personal consumption expenditures (PCE) price index, the Fed's preferred inflation metric, rose by an annual 5 per cent in December, down from November's rate of 5.5 per cent, official data showed on Friday.
The PCE price index ticked up by 0.1 per cent from November to December. Prices for goods decreased 0.7 per cent and energy costs fell 5.1 per cent.
At its last meeting in December, the Fed raised interest rates — for the seventh time since March 2022 — by 50 basis points.
“Fed speakers have been lining up for the downshift in the tightening of monetary policy but focus will fall on Federal Reserve Chairman Jerome Powell and how hawkish his commentary is following the decision,” said Mr Bell.
Oil markets are expected to further tighten after an EU embargo on Russian crude products comes into effect on February 5.
UBS, which expects oil prices to rise to $100 a barrel over the coming months, has said that unlike crude, it would be “more challenging” for Russia to divert refined products to other markets.
“Russia may try to export more crude, but there’s a limit in terms of how much additional crude barrels China and India can take, in our view,” the Swiss lender said in a research note last week.
Russian oil exports declined by 200,000 bpd last month after an EU crude embargo and a G7 price cap on the country’s crude shipments came into effect on December 5, according to the International Energy Agency.
At the same time, Russian diesel exports surged to a multiyear high of 1.2 million bpd, of which 720,000 bpd was destined for the EU, the IEA said.
The market for diesel, a major industrial fuel, has been tight due to the Ukraine war and low global inventories after the pandemic.
High natural gas prices supported increased switching activity from gas to other fuels, especially diesel and heating oil.