Crude oil rises as traders prepare for central bank decisions

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Crude oil prices rose in morning trade on Tuesday, stretching investors’ nerves over the impact of inflation as a host of central banks prepare to announce their latest moves on interest rates.

Brent, the international benchmark, extended gains into a fourth successive trading session, rising as much as 0.5 per cent to $94.93 per barrel, while US equivalent West Texas Intermediate added 1.1 per cent to $92.49. Both benchmarks touched their highest price in 10 months earlier in the day.

The gains have been spurred by news earlier this month that two of the world’s top producers, Saudi Arabia and Russia, will extend supply cuts until the end of year. 

Traders fretted that the uptick in oil prices could hamper central banks’ efforts to tame inflation in the US and Europe, adding to the banks’ case for keeping interest rates higher for longer, despite indications suggesting that global economic growth is slowing. The US, UK, Switzerland and Japan are among the countries whose central banks are meeting this week to set monetary policy.

Europe’s region-wide Stoxx Europe 600 fell 0.2 per cent, dragged lower by losses in healthcare stocks, while France’s Cac 40 declined 0.3 per cent and Germany’s Dax gave up 0.4 per cent. 

China’s benchmark CSI 300 index fell 0.2 per cent while Hong Kong’s Hang Seng gained 0.3 per cent. Japan’s Topix was up 0.1 per cent as markets reopened after a holiday.

The US Federal Reserve is set to announce its latest policy decision on Wednesday, with the overwhelming majority of the market betting it will keep rates steady at the current target range between 5.25 per cent and 5.5 per cent. 

However traders are less certain whether lingering price pressures will push US policymakers to raise rates one more time by the end of this year, and hold back their plans for cutting rates in 2024. 

The latest data on US consumer prices bolstered fears that the Fed’s last push to bring inflation back to its 2 per cent target might take longer than expected. Rising energy costs pushed the headline figure above forecasts, to 3.7 in August.

“The game, at the moment, is not about actual changes on Wed. It is about what is suggested in the statement,” said Mike Zigmont, head of trading and research at Harvest Volatility Management. “I’m sticking with the we’re-on-hold-until-the-Fed-tells-us-something narrative.”

Contracts tracking the tech-focused Nasdaq Composite gave up 0.1 per cent ahead of the New York opening bell, while those tracking Wall Street’s benchmark S&P 500 index were flat.

The Bank of England will follow the Fed with its own policy meeting on Thursday, and is likely to raise the benchmark bank rate by a quarter of a percentage point to 5.5 per cent. The Bank of Japan is on Friday expected to keep rates steady at their current level of minus 0.1 per cent.