Oil prices are declining after rising about 4% in the previous two sessions.
“The market has taken a breather ahead of the Fed meeting,” believes Saxo Capital Markets Pte analyst Charu Chanana. She notes, however, that oil prices continue to be supported by factors such as lower production in Russia and a projected rise in fuel demand in China, Bloomberg reported.
Deputy Prime Minister Alexander Novak said on Tuesday that Russia will extend the decision to reduce oil production by 500 thousand barrels per day until June 2023. In early February it was announced that in response to the introduction of the “ceiling” on oil prices from March its production will be reduced.
Quotes for May futures for Brent at London’s ICE Futures Exchange totaled $75 per barrel as of 7:09 a.m., down $0.32 (0.4%) from the close of the previous session. Those contracts rose $1.53 (2.1%) to $75.32 a barrel on Tuesday.
The price of WTI futures for May oil on the electronic trading on NYMEX fell by $0.33 (0.5%) to $69.34 per barrel on Wednesday morning. The contract value grew by $1.85 (2.7%) to $69.67 a barrel at the end of previous session.
The U.S. Federal Reserve’s March meeting will be held amid heightened uncertainty as banking problems added to high inflation and low unemployment, analysts said.
The consensus forecast calls for a 25-basis-point hike in the benchmark rate. Rate futures quotes suggest that traders see about an 83% chance of such a move. At the same time, many economists, including representatives of leading Wall Street banks, withdrew their forecasts for a rate hike and now believe that the Fed will take a pause and not change the cost of borrowing.
Oil prices are falling on Tuesday morning after a growth following the last session. Commodity markets are pressured by concerns about the global recession amid elevated risks in the financial sector.
The cost of May futures for Brent at London’s ICE Futures Exchange stood at $73.08 a barrel by 7:07 a.m., down $0.71 (0.96%) from the close of the previous session. At the close of trading the day before those contracts grew by $0.92 to $73.79 per barrel.
The price of WTI futures for April at electronic trades of the New York Mercantile Exchange (NYMEX) is $66.9 per barrel by that time, which is $0.74 (1.09%) lower than the final value of the previous session. The contract rose $0.9 to $67.64 on Monday.
“Oil is under pressure from general weakness in the economy as the outlook for global GDP worsens because of worries about the financial sector,” said Bobby Fraser of Schneider Electric. – Demand is heavily dependent on economic growth.”
The market is also waiting for the outcome of the Federal Reserve’s (Fed) March meeting, which concludes Wednesday night. Consensus forecasts call for a 25 basis point hike in the key interest rate, with many economists also expecting the rate to remain unchanged.
“Volatility is likely to persist this week, with financial market concerns remaining in focus. In addition, we are awaiting the Fed meeting, which increases uncertainty,” ING bank analysts wrote.
Oil prices continue to decline after last week’s drop, which was the most significant since last summer.
Negative sentiment in the oil market is due to concerns that the crisis in the U.S. banking sector can provoke a recession in the U.S. economy, reports MarketWatch.
The quotations of May futures for Brent oil on London’s ICE Futures Exchange as of 7:04 a.m. were $72.29 a barrel, which is $0.68 (0.9%) lower than the price at the close of the previous session. Those contracts fell $1.73 (2.3%) to $72.97 a barrel on Friday, the lowest level since December 20.
The price of WTI April futures on the New York Mercantile Exchange (NYMEX) fell $0.6 per barrel to $66.14 on Monday morning. The contract value fell by $1.61 (2.4%) to $66.74 a barrel at the end of previous session. This is the minimum since December 3.
Brent crashed by 11.9% in five trading days and WTI by 13%. This is the most significant weekly decline respectively since last August for European oil and since June for U.S. oil.
“Oil prices have been particularly susceptible to negativity amid the current market turmoil,” believes Commerzbank commodity analyst Barbara Lambrecht, referring to problems in the U.S. banking sector. At the same time, she believes “the drop in oil prices is excessive and mostly speculative.
Oil prices rise on Friday, but end the week with a significant decline amid a general decline in risk appetite in global markets due to the situation in the U.S. banking sector.
May Brent crude futures on London’s ICE Futures exchange are at $75.5 a barrel by 7:05 a.m. Q, up $0.8 (1.07%) from the previous session’s closing price. Those contracts rose $1.01 (1.4%) to $74.7 a barrel on Thursday.
The price of WTI crude futures for April at electronic trades of the New York Mercantile Exchange (NYMEX) rose by $0.75 (1.1%) by that time to $69.1 per barrel. The contract value grew by $0.74 (1.1%) to $68.35 per barrel at the end of previous session.
Both Brent and WTI have fallen more than 10% since the beginning of this week, which is the worst weekly dynamics for the market since the beginning of this year.
Traders are keeping a close eye on OPEC+, believing the cartel countries may take action in response to the market drop, Bloomberg noted.
“External factors continue to dictate conditions to the oil market,” said Warren Patterson, who is responsible for strategy in commodity markets at ING Groep NV. – The downturn in the market is probably a concern for OPEC+, but it is unlikely to act quickly. OPEC+ is more likely to wait for the situation to calm down.”
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman and Russian Deputy Prime Minister Alexander Novak on Thursday affirmed their countries’ commitment to the October 2022 OPEC+ decision to cut oil production by 2 million bpd by the end of 2023.
A day earlier, the Saudi prince told Energy Intelligence that the oil market is subject to very high uncertainty, so OPEC+ does not intend to change the parameters of the deal adopted last October.
Oil prices are rising on Thursday morning, rising from the previous day’s lows since December 2021.
The value of May futures for Brent on London’s ICE Futures exchange is $74.63 a barrel by 7:18 a.m., up $0.94 (1.28%) from the close of the previous session. Those contracts fell by $3.76 (4.9%) to $73.69 per barrel at the close of trading on Wednesday.
The price of WTI futures for April at electronic trades of the New York Mercantile Exchange (NYMEX) is $68.42 per barrel by that time, which is $0.81 (1.2%) above the final value of the previous session. The contract fell by $3.72 (5.2%) to $67.61 per barrel on Wednesday.
The fall of oil quotations was caused by concerns that the problems of the banking sector amid rising interest rates might lead to a global recession, writes MarketWatch.
In addition, released the day before, the U.S. Energy Department data showed an increase in oil reserves over the past week by 1.55 million barrels. The increase was recorded at the end of the 11th week of the last 12 weeks.
Gasoline reserves decreased by 2.06 million barrels and distillates by 2.54 million barrels.
Experts were expecting oil reserves to grow by 1.5 million barrels, gasoline reserves to decrease by 1.62 million barrels and distillates reserves to drop by 1.4 million barrels.
Oil prices are rising on Wednesday after falling the day before to their lowest since December last year on increased fears of a recession in the U.S. as a result of problems in the banking sector.
Brent crude futures on London’s ICE Futures Exchange stood at $78.52 a barrel by 7:05 a.m., up $1.07 (1.38%) from the close of the previous session. Those contracts fell $3.32 (4.1%) to $77.45 a barrel on Tuesday.
The price of WTI April futures at electronic trades of NYMEX grew by that time by $1.09 (1.52%) to $72.42 per barrel. At the end of previous session the contracts cost decreased by $3.47 (4.6%) down to $71.33 per barrel.
Both Brent and WTI futures closed Tuesday at their lowest levels since Dec. 9.
“The oil market is acting as if a recession in the economy is imminent,” notes Price Futures Group analyst Phil Flynn, quoted by Market Wach. – With signals of increased demand in China and a pullback in the U.S. dollar, one would expect oil to withstand all this economic turmoil.”
OPEC on Tuesday kept its forecast for global oil demand growth in 2023 at 2.3 million bpd. The organization raised its forecasts slightly for the first three quarters of 2023 and lowered them for the fourth.
According to the monthly report, stronger demand growth in China will offset declines in the U.S. and Europe.
The International Energy Agency (IEA) will release its review on Wednesday.
