By Georgi Kantchev

Beyond OPEC, China's economy or geopolitics, oil investors are monitoring another key factor for crude--the Federal Reserve.

With the Fed poised to raise rates at a faster clip than previously anticipated, analysts expect the resulting rise in the dollar and potential blow that implies for emerging markets to weigh on oil prices. Higher borrowing costs, meanwhile, could limit the growth of the U.S. shale industry, which has fueled its meteoric rise with cheap debt.

Oil prices have risen by close to a fifth since last year's deal between the Organization of the Petroleum Exporting Countries and other heavyweight producers to cut around 2% from global output. Some analysts expect prices to rise close to or above $60 a barrel, a level not seen since the summer of 2015.

On Thursday, Brent crude was trading up 0.9% at $54.41 a barrel.

A stronger dollar typically weighs down on the oil price because it makes the greenback-denominated commodity more expensive for holders of other currencies.

The election of Donald Trump added more fuel to the dollar's rise, given expectations that the president elect's tax cuts and fiscal spending could boost inflation and the economy, causing the Fed to raise rates even faster.

The Wall Street Journal dollar index, which measures the greenback against a basket of its peers, is up around 4% since the U.S. election.

"Rising interest rates are certainly a risk for the oil market this year, " said Tom Pugh, a commodities analyst at Capital Economics. "With Trump possibly embarking on a policy of fiscal expansion, we should see a real increase in interest rates this year and a higher dollar--all headwinds for oil prices."

The Fed has penciled in three rate increases this year, possibly raising its benchmark rate to 1.375% by year-end. Rate rises often increase the value of a currency because they attract money looking for the extra yield.

"A higher dollar makes me skeptical of the recent strength above $50" a barrel, said Hamza Khan, head of commodity strategy at ING Bank. Mr. Khan believes that Brent will average $45 a barrel this year, a below-consensus forecast that is partly shaped by the dollar's strength. A Wall Street Journal survey of investment banks last month predicted that Brent will average $56 a barrel in 2017.

Gains in the oil price have added to inflation elsewhere, which could sap appetite from other developed-world central banks, such as the European Central Bank, to increase or maintain their massive monetary stimulus programs. The ECB meets on Thursday to discuss its monetary policy.

"Monetary policies continue to have an important influence on the global economy and recent efforts by OPEC and some non-OPEC producers to rebalance the oil market," OPEC said in its monthly report Wednesday

Emerging markets, an important source of demand for crude, tend to suffer when U.S. rates climb, as capital leaves those markets and as dollar-denominated debt becomes more expensive to service.

"Rising U.S. interest rates could result in increased capital outflows from emerging and some other economies, and hence lower economic activity...limiting oil demand growth," OPEC wrote in its report.

Still, rising rates may also end up limiting growth in U.S. oil supply, which would add support for prices. That's because rising interest rates makes capital more expensive and so investments costlier for the U.S. shale industry.

A key question therefore is whether "higher interest rates will make it harder for shale drillers to borrow, in turn slowing the production boom, " Mr. Khan said.

Write to Georgi Kantchev at georgi.kantchev@wsj.com

(END) Dow Jones Newswires

January 19, 2017 07:02 ET (12:02 GMT)

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