Brent crude oil was steady above $86 on Wednesday morning as investors awaited the results of the Federal Reserve’s two day policy meeting. The commodity traded at $86.47 at 7:45 GMT with the bank set to wrap up and deliver its forward guidance later in the day.
The Federal Open Market Committee is likely to announce that the Fed’s bond buying stimulus has come to an end, but that the bank will keep interest rates low for an extended period. Though the US economy has been steadily recovering, the bank is unlikely to step in with a rate hike any time soon as inflation has been weak and outside pressure from struggles in Europe and China is threatening to weigh on US progress.
CNBC reported that although the Fed meeting will be a focal point for commodities investors, crude prices are unlikely to move more than $1 as there are several other factors tied to oil futures at the moment.
An upcoming meeting of OPEC is another driver for Brent prices as investors speculate as to whether or not the group will tighten is supplies. Some members have been calling for a supply cut in order to boost prices; but the majority, including Saudi Arabia and Iran, have said they are comfortable with the current price. By accepting low prices, some of the cartel’s members are hoping to regain market share lost to supply from Russia and the US.
The US shale boom has been a large contributor to the growing global supply glut, but data from the US on Tuesday showed some tightness in the market. The American Petroleum Institute released a report showing that US inventories increased by 3.2 million barrels in the week ending on October 24, but gasoline and distillate stockpiles declined more than expected.
Moving forward, investors will be watching for the US Energy Information Administration’s version of the same report, due out later on Wednesday.
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