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In volatile trading, oil prices were steady today ahead the US Federal Reserve policy announcement. Brent crude futures for August were up 15 cents, or 0.1%, at $121.32 a barrel while U.S. West Texas Intermediate crude for July rose 15 cents, or 0.1%, to $119.08 a barrel. Analysts say that if Fed hikes rates by 75 bps, oil prices could remain under pressure in the near term as a hawkish Fed may push investors flow into safe-haven dollar and hit risk-sensitive assets like oil.

Traders are also looking at the latest COVID outbreak in China, traced to a 24-hour bar in Beijing, that has raised fears of a new phase of lockdowns.

Technically, oil is likely to remain supported if prices remain above $118, says domestic brokerage Geojit. 

Consistent trades below $115 is a weak signal, the brokerage added. 

“NYMEX crude trades mixed near $119/bbl amid positioning ahead for inventory report and Fed decision. US EIA weekly report is expected to note a decline in US crude oil stocks and an increase in product stocks. Ahead of US EIA data, API weekly report has noted an unexpected decline in US crude oil stocks but also an unexpected decline in gasoline stocks," said Ravindra Rao, Head Commodity Research at Kotak Securities.

"Crude is choppy also as market players await more clarity about a proposed legislation on US oil firms. Crude may remain choppy ahead of key events however tightness concerns may keep prices supported."

Meanwhile, the Biden administration said US will be selling up to 45 million barrels of oil from the Strategic Petroleum Reserve, largest-ever release from the stockpile. Deliveries of crude would take place from August 16, the Energy Department said.

Oil prices have spiked after Russia, one of the world's top petroleum producers, invaded Ukraine and as the West imposed sanctions on Moscow. The rise has come as few global oil producers have spare capacity while consumers emerging from the pandemic drive fuel demand.

In its monthly report, the Organization of the Petroleum Exporting Countries (OPEC) “current geopolitical developments and the uncertain roll-out of the pandemic toward the end of the second half of the year continue to pose a considerable risk to the forecast recovery to pre-pandemic levels. Inflationary pressures are likely to persist and it remains highly uncertain as to when geopolitical issues may be resolved. Nevertheless, oil demand is forecast at healthy levels in the second half of this year."

 

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