Oil prices started the week lower during Monday’s Asian session as investors remained concerned that the increase in U.S. production would lead to a new supply glut. U.S. drillers added four oil rigs last week to bring the total count to 800, Baker Hughes’s weekly report showed on Friday. U.S. crude oil production is more than twenty percent higher than mid-2016, and the United States is now producing more than Saudi Arabia which used to be the top exporter. Russia is currently the world’s biggest exporter, though the U.S. is expected to surpass Russian exports sometime this year.
U.S. WTI futures were down 0.43 percent to $62.07 per barrel as of 2:05 p.m. HK/SIN. Brent crude futures were down 0.41 percent or 27 cents per barrel to $65.94 per barrel. One factor tempering the markets is the economic crisis in Venezuela that has forced the country to drastically reduce its output, a move which may be harmful for the country’s economy but can potentially help keep the threat of global oversupply under control.
All Eyes on the Fed
Asian markets were mixed early Monday afternoon as investors eyed the Federal Open Market Committee (FOMC) meeting later this week. The Fed is largely expected to raise interest rates at the upcoming meeting and to provide some insights to its plans for further rate hikes during the year. All 104 analysts polled by Reuters predict a rate hike between 1.5 percent and 1.75 percent on Wednesday, though opinions were mixed as to whether the Fed would confirm its plan for three rate hikes this year or move towards adding a fourth.
The yen strengthened against the dollar, with the dollar falling 0.26 percent to trade at 105.72 yen. The dollar did firm slightly against the euro, trading at $1.2261. The greenback was also higher against the Canadian dollar and the Swiss franc.