Oil Prices Decline – Waiting for Signals from the U.S. Federal Reserve

Oil prices have retreated from their recent highs as investors eagerly anticipate the upcoming Federal Reserve meeting. Analysts expect the meeting might provide indications of possible further interest rate cuts that could boost economic growth and oil demand. However, the declines in oil prices are limited due to concerns about supply disruptions from potential new U.S. sanctions against major suppliers Russia and Iran. These geopolitical tensions have affected market perception and increased volatility. In the Brent crude oil market, futures fell by 21 cents or 0.3% to $74.28 per barrel, after recently reaching the highest level since late November. U.S. West Texas Intermediate also saw a decline of 30 cents or 0.4% to $70.99 per barrel. Prices have been additionally supported by new European Union sanctions against Russian oil and anticipated stricter measures against the Iranian oil sector, according to IG market analyst Tony Sycamore. U.S. Treasury Secretary Janet Yellen signaled on Friday the possibility of further sanctions against tankers of the so-called "dark fleet" and did not rule out sanctions against Chinese banks. Announced U.S. sanctions against Iranian oil traders are driving prices for crude oil exported to China to a multi-year high. Moreover, the new Trump administration could further increase pressure on Iran. Interest rate cuts by leading central banks in Canada, Europe, and Switzerland last week also contribute to supporting oil prices. The Fed is expected to make a quarter percentage point rate cut at its meeting to provide insight into its future rate policy. These monetary policy measures could stimulate the economy and further increase oil demand.