Oil Prices Decline: Traders Take Profits – Eyes on the Fed

Oil prices experienced a setback from their recent highs as investors opted to take profits while awaiting the upcoming Federal Reserve meeting. Markets are hoping for insights into potential further rate cuts. However, the price decline was limited by concerns over possible supply disruptions, especially in the event of new U.S. sanctions against major oil producers like Russia and Iran. Brent crude futures fell 21 cents to $74.28 per barrel after recently reaching their highest level since November 22. U.S. West Texas Intermediate crude also saw a decline of 30 cents to $70.99 per barrel. According to IG market analyst Tony Sycamore, this decline was expected after the impressive rally of the previous week, as many trading activities were winding down for the year and the willingness to take new positions remains low during the holidays. Oil prices received a last boost from new European Union sanctions against Russian oil and expectations of stricter measures against the Iranian oil sector. U.S. Treasury Secretary Janet Yellen stated that the U.S. is considering further sanctions against so-called "dark fleet" tankers and would not rule out sanctions against Chinese banks to reduce Russia's oil revenues. New sanctions against Iranian oil trading partners have already led to prices of crude oil sold to China reaching a multi-year high. The upcoming U.S. administration foresees further pressure on Iran. Oil prices were also supported by interest rate decisions from major central banks in Canada, Europe, and Switzerland, as well as the expectation that the Fed is also planning a rate cut. Interest rate cuts can promote economic growth and oil demand. Nevertheless, forecasts of ample supply in 2025 by the International Energy Agency and predictions by CNPC of a demand decline in China, after a peak in 2023, remain challenging factors for the global oil markets.