Brent Caught Between Supply Concerns and Waning Demand
Brent crude oil was stuck between supply interruption fears and waning demand worries on Monday morning, but the weakening global economy overshadowed geopolitical problems in the Middle East and pushed crude prices down.
The commodity traded at $106.93 at 9:04 GMT on Monday morning, but CNBC reported that analysts are expecting to see it trade between $106 and $109 this week.
Investors are waiting to see official data which will give insight into the Chinese economy after initial HSBC PMI data showed that Chinese manufacturing activity was at its slowest in 11 months.
The US Federal reserve will begin a two day policy meeting on Tuesday, at which the bank will likely discuss its plans to taper its stimulus spending. Weeks ago, Federal Reserve Chairman Ben Bernanke announced that the central bank was planning to roll in its $85 billion per month bond purchasing scheme as the US economy improved. However, since then the dollar has been on a wild ride as investors try to work out the bank's timeline for the tapering.
At this week's meeting, investors will be looking for the Fed to confirm or deny speculation that it will cut back its bond buying by September. Confirmation could spark a selloff, while a delay may start a rally.
Geopolitical tension has mitigated losses due to weak demand prospects as both the Middle East and Africa remain in a precarious balance. In Libya, explosions in Benghazi reminded the world of the region's instability and gave investors reason to worry that ongoing protests in Egypt could eventually spill over the country's borders and spread to oil rich nations.
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