Oil edges down as inflation expected to impact fuel demand

Aug 30 (Reuters) – Oil prices dipped on Tuesday, paring some gains from the previous session, as the market feared that more aggressive interest rates hikes from central banks may lead to a global economic slowdown and soften fuel demand.

Brent crude futures for October settlement dropped 81 cents, or 0.7%, to USD 104.28 a barrel by 0359 GMT after climbing 4.1% on Monday, the biggest increase in more than a month.

The October contract expires on Wednesday and the more active November contract was at USD 102.33, down 0.6%.

US West Texas Intermediate crude was at USD 96.68 a barrel, down 33 cents, or 0.3%, following a 4.2% rise in the previous session.

Inflation is near double-digit territory in many of the world’s biggest economies, a level not seen in close to a half century, which could prompt central banks in the United States and Europe to resort to more aggressive interest rate hikes.

“Risk appetite has cooled over an anticipation that the Federal Reserve would continue to increase interest rates…A pull-back of natural gas prices in Europe also adds uncertainties to the picture of energy crisis,” said analysts from Haitong Futures.

Also weighing on prices, Russia’s oil output has exceeded expectations in the wake of the war in Ukraine, the head of the International Energy Agency (IEA) said on Monday. But he said that Moscow, which calls its actions in Ukraine “a special operation”, will find it increasingly difficult to uphold production as Western sanctions begin to bite.

IEA members nations could release more oil from strategic petroleum reserves (SPR) if they find it necessary when the current scheme expires, the head of the agency also said.

However, political violence on Monday night in Iraq, OPEC’s second-largest producer, supported prices.

Government security forces and militias loyal to Shi’ite cleric Moqtada al-Sadr clashed around the Green Zone that houses government headquarters and embassies in the capital Baghdad, killing 20, in a long-running dispute over the formation of a new government since elections last year.

“As a major oil exporter with an output of over 4 million barrels per day, (Iraq’s) domestic situation has no less impact on oil prices than Iran,” Haitong’s analysts said.

Also offering some support to prices is tight supply. Saudi Arabia, top producer in the Organization of the Petroleum Exporting Countries (OPEC), last week raised the possibility of production cuts, which sources said could coincide with a boost in supply from Iran should it clinch a nuclear deal with the West.

OPEC+, comprising OPEC, Russia and allied producers, meets to set policy on Sept. 5.

The American Petroleum Institute, an industry group, is due to release data on US crude inventories on Tuesday with the Energy Information Administration, the statistical arm of the US Department of Energy, to follow on Wednesday.

US crude oil stockpiles likely fell 600,000 barrels with distillates and gasoline inventories also seen down, a preliminary Reuters poll showed on Monday.

(Reporting by Arathy Somasekhar and Muyu Xu; Editing by Kenneth Maxwell and Christian Schmollinger)

Stocks, bonds fumble for footing as focus turns to payrolls

HONG KONG, Aug 30 (Reuters) – Stock and bond markets attempted to steady on Tuesday, as investors turned their focus to this week’s US labour market report, to gauge if interest rate hikes that have been priced in around the world are justified.

By mid-morning, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4%, while Japan’s Nikkei stock index rose nearly 1%, in part helped by a fresh round of weakness in the Japanese yen.

Wall Street indexes fell on Monday, but the pace of selling was reduced and US stock futures ESc1 were steady in Asia.

Besides interest rates, the health of China’s economy is also at the forefront of investor concerns. China’s benchmark Shanghai Composite Index lost 0.4% in early trade.

Hong Kong’s Hang Seng index fell 1.8% as investors start to walk back their enthusiasm about an agreement struck between China and the United States for access to Chinese companies audit papers.

At the Jackson Hole conference last week, Federal Reserve Chair Jerome Powell and European Central Bank speakers struck a hawkish tone, driving selling of bonds and equities as traders jacked up near-term interest rate expectations.

“The markets focus for the next couple of weeks at least, will be the likely Fed action,” said Manishi Raychaudhuri, head of APAC equity research at BNP Paribas.

“Earlier, there was talk of a pivot of a possible cutting of interest rates by the Fed, maybe in 2023 second half or so, but that is now sort of falling by the wayside,” he said.

“Higher for longer (interest rate) is possibly the kind of narrative that’s building up,” he said.

Futures markets have odds of better than two-thirds that the ECB raises rates by 75 basis points in September, and see about a 70% chance that the Fed does likewise.

US non-farm payrolls data is due on Friday, and markets may not like a strong number if it supports the basis for a continuation of aggressive interest rate hikes.

US Treasuries settled down on Tuesday morning. The two-year yield fell to 3.4293%, after rising as high as 3.489% on Monday, its highest since late 2007.

Benchmark 10-year yields also fell to 3.0949%, down from 3.13% on Monday.

The US dollar steadied after an overnight dip, though the euro was already struggling to hang on to small gains driven by ECB hike bets and a cooling of gas prices.

The dollar index =USD, which measures the currency’s value against a basket of peers, rose 0.2% to 108.85, not far from the two-decade peak of 109.48 it made a day earlier. The dollar traded at USD 0.9987 per euro and bought 138.59 yen.

Oil mostly held gains on the prospect of output cuts, as traders look ahead to a producers meeting on Sept. 5. US crude was about 30 cents a barrel weaker at USD 96.68 and Brent crude fell 68 cents to USD 104.41.

Gold was slightly lower. Spot gold was traded at USD 1,735.95 per ounce.

(Editing by Jacqueline Wong)

Dollar sags below 20-year peak as euro lifted by ECB bets

TOKYO, Aug 30 (Reuters) – The dollar languished on Tuesday after being beaten back from a two-decade high versus major peers by a reinvigorated euro.

The tables turned for the two currencies as traders began ramping up bets for a super-sized 75 basis-point rate hike by the European Central Bank, while paring the odds for one by the US Federal Reserve.

The dollar index – which measures the greenback against a basket of six currencies, with the euro the most heavily weighted – stood at 108.65 at the start of the Asian day, after dropping back from 109.48 overnight, a level not seen since September 2002.

The euro edged 0.08% higher to USD 1.00045, extending Monday’s 0.32% rally – which was its biggest in almost three weeks – after failing to keep its head above parity for the past week.

“The euro has found some stability near parity with help from reports that a 75bp hike could be on the cards at the September ECB meeting,” said Sean Callow, a currency strategist at Westpac in Sydney.

“But the euro’s yields remain unappetizing and the deepening gas crisis in Europe means that more aggressive ECB hikes would only deepen recession. We expect EUR/USD to print fresh 20-year lows in coming days, with 0.98 the next obvious target.”

Traders see better than 50% odds for a 75 bps move by the ECB on Sept. 8 after a parade of ECB speakers at the Fed’s annual symposium in Jackson Hole backed the case for a big hike.

By comparison, bets for a 75 bps increase by the Fed on Sept. 21, while higher at 70%, have receded from as much as 75% on Monday.

Monthly US jobs figures due on Friday will be closely watched for further clues on the rates outlook.

The euro was also helped by a retreat in European gas prices after German economy minister Robert Habbeck said the country was filling gas storage facilities faster than expected.

The dollar slid 0.17% to 138.505 yen, after rising to 139 overnight for the first time since mid-July.

Sterling added 0.1% to USD 1.17175, recovering from an almost 2-1/2-year low of USD 1.16495 reached on Monday.

The Aussie edged 0.04% higher to USD 0.69125, bouncing from USD 0.6841 in the previous session, a six-week low.

(Reporting by Kevin Buckland; Editing by Jacqueline Wong)

Wall Street retreats as rate hike concerns persist

NEW YORK, Aug 29 (Reuters) – US stocks closed lower on Monday, adding to last week’s sharp losses on nagging concerns about the Federal Reserve’s determination to aggressively hike interest rates to fight inflation even as the economy slows.

Fed Chair Jerome Powell said on Friday the US economy would need tight monetary policy “for some time” before inflation is under control, dashing hopes the Fed might pivot to more subdued rate hikes after recent data suggested price pressures were peaking.

The S&P 500 recovered from session lows that put it down 1% at the lowest in a month, but the benchmark index still notched its biggest two-day percentage decline in 2-1/2 months.

“Friday’s selloff was frankly overdone, I know (Powell) said he was going to play tough with inflation but it is honestly not that much different than what he has been saying for the last several weeks, he was a little more hawkish but I mean, geez, who is surprised by that, really?” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

“I don’t see a whole lot of up or downside here in the near term, I see a lot of volatility and that is probably going to be the case at the very least until we get past the September 21 rate hike.”

The Dow Jones Industrial Average fell 184.41 points, or 0.57%, to 32,098.99, the S&P 500 lost 27.05 points, or 0.67%, to 4,030.61 and the Nasdaq Composite dropped 124.04 points, or 1.02%, to 12,017.67.

Megacap technology and growth stocks such as Apple Inc. (AAPL), off 1.37%, and Microsoft Corp. (MSFT), down 1.07% were among the biggest drags on the index as Treasury yields rose.

The CBOE’s volatility index, Wall Street’s fear gauge, hit a seven-week high of 27.67 points.

Money market traders are pricing in a 72.5% chance of a 75-basis-point interest rate hike at the Fed’s September meeting, which would be the third straight hike of that magnitude. They expect the Fed funds rate to end the year at about 3.7%.

The two-year Treasury yield, which is particularly sensitive to interest rate expectations, briefly touched a 15-year high, while the closely watched yield curve measured by the gap between two and 10-year yields remained firmly inverted.

An inversion is considered by many to be a reliable signal of a looming recession.

Economic data this week is highlighted by the August nonfarm payrolls report due on Friday. Any signs of a slowdown in the labor market might take pressure off the Fed to continue with outsized rate hikes.

The S&P 500 climbed nearly 11% since mid-June through Friday’s close. It recently found support just above its 50-day moving average, although it remains well below its 200-day moving average. Despite the rebound, some investors remain worried as September approaches due to the historical weakness for stocks during the month and the anticipated hike from the Fed.

Energy stocks, up 1.54%, were a bright spot as crude prices jumped about 4% on possible OPEC+ output cuts and conflict in Libya.

Bristol Myers Squibb (BMY) slid 6.24% after its drug candidate for preventing ischemia strokes missed the main goal in a mid-stage trial.

Volume on US exchanges was 9.36 billion shares, compared with the 10.59 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.19-to-1 ratio; on Nasdaq, a 2.20-to-1 ratio favored decliners.

The S&P 500 posted 2 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 28 new highs and 199 new lows.

(Reporting by Chuck Mikolajczak; Editing by Cynthia Osterman and David Gregorio)

Wall Street extends losses on rate hike worries

Aug 29 (Reuters) – US stock indexes fell on Monday, adding to a sharp selloff last week as investors worried about the Federal Reserve’s plan to keep raising interest rates in its fight against inflation even at the cost of an economic slowdown.

Fed Chair Jerome Powell said on Friday that the US economy would need tight monetary policy “for some time” before inflation is under control, quashing hopes of more modest rate hikes after recent data suggested price pressures were peaking.

“Investors are coming to terms with the idea that the Fed is serious about curbing inflation,” Rod von Lipsey, managing director at UBS Private Wealth Management, said in a note.

“We believe the economic data justifies a 50 or 75 basis point rate hike at the September meeting, with the potential for additional 25 or 50 basis point rate hikes at the November and December meetings to stay ahead of inflationary trends.”

Money market traders are pricing in a 64.5% chance of a third straight 75-basis-point interest rate hike in September and expect the Fed funds rate to end the year at around 3.7%.

Heavyweight technology and growth stocks such as Apple Inc. (AAPL), Microsoft Corp. (MSFT) and Tesla Inc. (TSLA) were down between 1.1% and 1.5%, hit by rising US Treasury yields.

The US two-year Treasury yield, which is particularly sensitive to interest rate expectations, briefly scaled a 15-year high, while the closely watched yield curve measured by the gap between two and 10-year yields remained strongly inverted.

An inversion is seen by many as a reliable signal of an impending recession.

At 10:13 a.m. ET, the Dow Jones Industrial Average was down 214.13 points, or 0.66%, at 32,069.27, the S&P 500 was down 20.78 points, or 0.51%, at 4,036.88, and the Nasdaq Composite was down 69.95 points, or 0.58%, at 12,071.77.

The CBOE’s volatility index, Wall Street’s fear gauge, hit a seven-week high of 26.92 points.

The benchmark S&P 500 index has climbed nearly 11% since mid-June but is still in a bear market after plummeting early this year. Some investors fear a tough September due to seasonal weakness and nervousness about the economic pain from interest rate hikes.

“We went from the Powell ‘put’ in June to the Powell ‘put down’ in August. So the market that had rallied on his guidance from June had to pull that rally back out,” said David Waddell, chief investment strategist at Waddell & Associates.

“The market is a trader’s paradise right now … the economic backdrop has to prove a reason to be optimistic. Until then the traders are just going to vacillate between optimism and pessimism based upon what the Fed says.”

Energy stocks climbed 2.5%, tracking a more than 2% jump in oil prices as potential OPEC+ output cuts and conflict in Libya helped to offset a strong US dollar.

Bristol Myers Squibb (BMY) slid 6.2% after its drug candidate for preventing ischemia strokes missed the main goal in a mid-stage trial.

Dow Inc. (DOW) and Lyondell Basell Industries (LYB) fell 1.9% and 1.5%, respectively, after Keybanc downgraded the chemicals company’s stocks to “underweight” from “sector weight”.

Declining issues outnumbered advancers for a 2.16-to-1 ratio on the NYSE and for a 1.89-to-1 ratio on the Nasdaq.

The S&P index recorded 2 new 52-week highs and 20 new lows, while the Nasdaq recorded 11 new highs and 131 new lows.

(Reporting by Devik Jain and Anisha Sircar in Bengaluru; Editing by Aditya Soni)

Gold recovers from one-month low as US dollar backtracks

Aug 29 (Reuters) – Gold prices reversed course to trade higher on Monday as a dollar rally lost its steam, having pushed bullion to one-month lows earlier in the session after the US Federal Reserve signalled higher interest rates.

Spot gold rose 0.3% to USD 1,742.83 per ounce by 10:09 a.m. ET (1409 GMT). Prices touched their lowest since July 27 at USD 1,719.56 earlier in the session.

US gold futures up 0.2% to USD 1,752.90.

“Gold sold-off after Powell’s speech and right now the uptick is due to pure bargain hunting as well a pull-back in dollar… Gold will soon start trading in a small range till further clues from the Fed,” said Bob Haberkorn, senior market strategist at RJO Futures.

The dollar fell 0.2%, slightly easing off two-decade highs, making gold less expensive for other currency holders.

In a speech at Jackson Hole, Wyoming, Powell said Fed will raise rates as high as needed to curb inflation.

Market participants are now largely pricing in a 75-basis-point rate hike at the Fed’s September meeting.

Gold is considered an inflation hedge, but the non-yielding asset’s appeal dims amid high-interest rate environment.

“Gold bulls’ upside price objective is to make a form above solid resistance at USD 1,800 and bears’ near-term downside price objective is pushing futures prices below solid technical support at USD 1,700,” said Jim Wyckoff, senior analyst at Kitco Metals.

Capping gains in gold, benchmark US Treasury yields were higher for the day.

“The US is headed into a recession, Fed can’t be aggressive then; once the market gets further confirmation on that, gold will start to rise,” Haberkorn added.

Meanwhile, Goldman Sachs slashed British growth forecast and expects a recession to begin later in the year.

Spot silver fell 0.5% to USD 18.79 per ounce, and platinum rose 0.6% to USD 868.80.

Palladium rose 1.1% to USD 2,133.33.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri)

Dollar zooms higher as markets brace for higher-for-longer rates

LONDON, Aug 29 (Reuters) – The dollar shot higher on Monday, briefly scaling fresh 20-year highs against a basket of other currencies, as Federal Reserve Chair Jerome Powell signaled interest rates would be kept higher for longer to bring down uncomfortably high inflation.

The dollar index, which measures the currency’s value against a basket of peers, scaled a fresh two-decade peak of 109.48 before retreating as the European session wore on.

It held around 0.65% firmer against Japan’s yen, while China’s yuan breached the key threshold of 6.9 per dollar and Britain’s pound hit a fresh 2-1/2 year low.

The euro managed to claw back some ground and was last up 0.3% at USD 0.9992 as hawkish European Central Bank comments lifted expectations for a supersized September rate hike.

A comment by German Economy Minister Robert Habeck that he expects gas prices to fall soon, with Germany making progress on its storage targets, may also have supported the euro.

London markets were closed for a public holiday.

Powell told the Jackson Hole central banking conference in Wyoming on Friday that the Fed would raise rates as high as needed to restrict growth, and would keep them there “for some time” to bring down inflation that is running at more than three times the Fed’s 2% goal.

“Powell’s comments endorsed the pricing of a higher Fed funds rate for a longer period,” said Kenneth Broux, a currency strategist at Societe Generale. “The assumption that the Fed would start cutting rates in mid-2023 is premature.”

Money markets ramped up bets for a more aggressive Fed rate hike in September, with the chances of a 75 basis point hike now seen around 70%. US Treasury yields shot up, with two-year bond yields hitting a 15-year high at around 3.49%, bolstering the greenback.

The dollar was up 0.65% at 138.52 yen, having hit its highest since July 21.

The onshore yuan finished domestic trade at 6.9210 per dollar, the weakest close since Aug. 20, 2020, while the offshore yuan fell to a fresh two-year low of 6.9325 per dollar.

Sterling fell to a 2-1/2-year low of USD 1.1649 and was last down 0.3% at USD 1.1698.

Expectations for a supersized September rate hike in the euro area also rose. ECB board member Isabel Schnabel warned on Saturday that central banks risk losing public trust and must act forcefully to curb inflation, even if that drags their economies into a recession.

“Central banks have no interest in being anything but hawkish right now, given inflation, so they will hike rates aggressively,” said Nordea chief analyst Jan von Gerich.

As risk-off sentiment gripped world markets, the Aussie dollar fell to USD 0.6838, the lowest since July 19, while the kiwi hit its lowest since mid-July at USD 0.61.

In cryptocurrencies, bitcoin recovered some ground but remained below the USD 20,000 level it dipped below at the weekend.

(Reporting by Dhara Ranasinghe; Additional reporting by Rae Wee in Singapore; Editing by Christina Fincher, Jan Harvey and Nick Macfie)

Funds firmly in hawkish Fed camp with record bet on rates: McGeever

ORLANDO, Fla., Aug 29 (Reuters) – “Don’t fight the Fed” is a well-worn market maxim, and hedge funds are sticking to it like glue.

US futures markets positioning data show that speculators are heeding the increasingly clear signals from Federal Reserve officials that interest rates will be raised as high as is necessary to bring inflation back under control.

The Commodity Futures Trading Commission report for the week to August 23 – three days before Fed Chair Jerome Powell’s Jackson Hole speech – show that funds increased their record bet on higher interest rates, and amassed their largest short position in two-year Treasuries futures in over a year.

In light of Powell’s relatively hawkish speech in Wyoming, which slammed Wall Street and pushed up the Fed’s ‘terminal rate’ market pricing implied by ‘SOFR’ interest rate futures, it is proving to be a winning strategy.

The latest CFTC report shows that speculators’ net short position in three-month SOFR futures stood at a record 1.052 million contracts in the week through Aug. 23.

That is up from 956,971 contracts the week before. The net short position has doubled in the space of a month.

Funds also increased their net short position in two-year Treasuries to 241,143 contracts, the biggest bearish bet on short-dated bonds since May last year.

A short position is essentially a wager that an asset’s price will fall, and a long position is a bet it will rise. In bonds and rates, yields fall when prices rise, and move up when prices fall.

JOB NOT DONE

After Powell’s speech on Friday, traders pushed the Fed’s terminal rate implied by Secured Overnight Financing Rate futures, to be reached by March next year, above 3.80%. Early this month, the terminal rate was around 3.20% and priced for December this year.

What’s even more striking than this rise of around 60 basis points is the jump in implied rates for the end of next year. The December 2023 SOFR contract on Friday implied a fed funds rate of 3.45%, 90 bps higher than the 2.55% implied on Aug. 1.

Traders’ are molding a pretty firm ‘higher for longer’ view of the Fed, and thoughts of a pivot next year are evaporating. Only 35 bps of easing is priced in for the back end of next year, down from 60 bps a few weeks ago.

Even though inflation appears to be cooling, Powell was clear that the Federal Market Open Committee is taking no chances.

“The bottom line was that the FOMC’s job is not done, and that it will need to follow through with additional hikes — despite potential economic pain — … and then keep policy restrictive for a time,” economists at Barclays wrote on Friday.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Alistair Bell)

Traders ramp up bets on 75 basis-point ECB Sept hike, bond yields jump

Aug 29 (Reuters) – Euro zone money markets moved on Monday to price in a two-thirds chance of a large 75 basis-point European Central Bank rate hike in September after policymakers made the case over the weekend for a large move to tame inflation four times above their target.

Particularly in focus was ECB board member Isabel Schnabel, who argued that the risk is rising that long-term inflation expectations “de-anchor” from the bank’s 2% target and surveys suggest inflation is denting public trust in central banks.

Others said frontloading hikes would be reasonable and that the neutral rate, estimated around 1.5%, should be reached before year-end or first quarter 2023.

Traders on Monday priced in as much as 67 basis points of rate hikes at the bank’s Sept. 8 policy meeting, meaning they fully priced in a 50 basis-point move and a 67% chance of a 75 basis-point move, Refinitiv data showed.

That compares to a 24% chance of the larger move they priced on Friday, before a Reuters report that some policymakers wanted to discuss the bigger move raised the odds to 48%.

“The most important signal (from Jackson Hole) was from Schnabel who talked about the risk of inflation expectations moving above target, that the central bank would have to hike rates more violently, and that is something new,” said Jan von Gerich, chief analyst at Nordea.

As rate hike bets rose, Germany’s two-year bond yield, sensitive to interest rate expectations, rose as much as 19 basis points (bps) on the day to 1.162%, the highest since June 17.

Its 10-year yield, the benchmark for the euro area, rose as much as 15 bps on the day to 1.548%, its highest in two months.

“The ECB clearly looks with determination to frontload the hikes and this will linger on ahead of the September meeting,” said Piet Christiansen, chief analyst at Danske Bank in Copenhagen, now expecting a 75 bps hike.

ECB chief economist Philip Lane added to the comments on Monday, saying the bank should raise interest rates at a “steady pace” and that appropriate increments will be larger the wider the bank is form peak rates and the more skewed the risks are to its inflation target.

Bond yields eased from the day’s highs as gas prices dropped sharply after Germany’s economy minister said he expects prices to fall as Germany is set to hit its 85% Oct. 1 storage target in early September. Germany’s 10-year yield was up 9 bps by 1350 GMT.

Ten-year yields in Italy, a key ECB stimulus beneficiary, jumped as much as 17 bps to 3.873%, the highest since mid-June, pushing the closely-watched spread to German peers to 236 bps, the highest in a month.

Rohan Khanna, strategist at UBS, said the more front-loaded rate hikes, the more likely the ECB will have to consider activating its Transmission Protection Instrument, under which it will buy bonds from countries whose borrowing costs relative to Germany are rising through no fault of their own.

“The harder the ECB pushes on the rate-hike pedal, the faster we are likely to get to 300 bps on this spread,” he said.

(Reporting by Yoruk Bahceli, additional reporting by Dhara Ranasinghe; Editing by Dhara Ranasinghe, Emelia Sithole-Matarise and Angus MacSwan)

Oil rises on prospect of OPEC+ supply cut

LONDON, Aug 29 (Reuters) – Oil rose more than 1% on Monday, extending last week’s gain, as potential OPEC+ output cuts and conflict in Libya helped to offset a strong US dollar and a dire outlook for US growth.

Saudi Arabia, top producer in the Organization of the Petroleum Exporting Countries (OPEC), last week raised the possibility of production cuts, which sources said could coincide with a boost in supply from Iran should it clinch a nuclear deal with the West.

Brent crude was up USD 1.14, or 1.1%, at USD 102.13 a barrel by 1332 GMT, having risen by 4.4% last week. US West Texas Intermediate (WTI) crude gained USD 1.52, or 1.6%, toUSD 94.58 after rallying 2.5% last week.

“Oil prices are inching higher on hopes of a production cut from OPEC and its allies to restore market balance in response to the revival of Iran’s nuclear deal,” said Sugandha Sachdeva, vice president of commodity research at Religare Broking.

OPEC+, comprising OPEC, Russia and allied producers, meets to set policy on Sept. 5.

The price of crude oil has surged this year, with Brent coming close to a record high of USD 147 in March as Russia’s invasion of Ukraine exacerbated supply concerns. Rising fears over high interest rates, inflation and recession risks have since weighed on the market.

Oil’s gain was limited by a strong US dollar, which hit a 20-year high on Monday after the Federal Reserve chairman signalled that interest rates would be kept higher for longer to curb inflation.

“While a strong dollar restrains broad commodity prices, the undersupply issue in the oil markets will probably continue to support the upside bias,” said CMC Markets analyst Tina Teng.

Unrest in Libya’s capital at the weekend, resulting in 32 deaths, sparked concern that the country could slide into a full-blown conflict and disrupt in oil supply from the OPEC nation.

(Reporting by Alex Lawler; Additional reporting by Mohi Narayan in New Delhi and Sonali Paul in Melbourne; Editing by David Goodman, Kirsten Donovan)

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