Oil dips below $100 per barrel as Fed prepares to raise interest rate

A week after topping $130 per barrel, oil prices have dropped back down to around $100 per barrel. According to CNBC, West Texas Intermediate crude, the U.S. oil benchmark, peaked at $129.44 per barrel last Monday. Meanwhile, Brent crude, the international benchmark, topped out at $133.15 last Monday. A week later, West Texas Intermediate dropped to $99.76 and Brent dropped to $103.49.

Russia’s invasion of Ukraine has driven up oil prices. The price surge for oil, as well as wheat and other commodities produced in the region, has led to sharp day-to-day and hour-to-hour reversals across markets as expectations for worsening inflation rise and fall.

“Oil prices might continue moderating this week as investors have been digesting the impact of sanctions on Russia, along with parties showing signs of negotiation towards ceasefire,” said Tina Teng, an analyst at financial services company CMC Markets.

UBS analyst Giovanni Staunovo added “beside new talks between Ukraine and Russia, I guess new lockdowns in China are the reason for a negative start of the week for crude oil.”

The oil price dip came two days before the Federal Reserve’s policymaking committee is set to meet. That committee is expected to raise its key short-term interest rate by a quarter of a percentage point. Fed Chair Jerome Powell expressed his support for the idea when testifying in front of Congress earlier this month.

“Finally, the Fed gets moving,” economists at BofA Global Research wrote in a report. But CEO of Infrastructure Capital Advisors Jay Hatfield said the market is not going to move much until the official decision is made.

“You’re seeing pretty muted trading today and people aren’t going to get too short or long ahead of the Fed,” Hatfield said. “We expect the market to stay pretty range-bound until the Fed meeting on Wednesday.”