Oil prices are down on Monday after rising more than 2% on Friday on information about Russia’s intention to reduce production.
April Brent crude futures on London’s ICE Futures exchange stood at $85.58 a barrel by 7:10 a.m. Monday, down $0.81 (0.94%) from the previous session’s closing price. Those contracts rose $1.89 (2.2%) to $86.39 a barrel on Friday.
The price of WTI futures for March crude oil fell by $0.92 (1.15%) to $78.8 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX) by that time. The contract value grew by $1.66 (2.1%) to $79.72 per barrel at the end of previous session.
Over the previous week Brent gained 8.1% and WTI gained 8.6%.
Russian Deputy Prime Minister Alexander Novak told reporters on Friday that the country intended to cut oil production by 500,000 bpd in March.
Most analysts have already put the likelihood of Russia cutting oil production by 700,000 to 900,000 barrels in 2023 on prices, said CIBC Private Wealth US senior trader Rebecca Babin.
“The key factor that could lead to prices moving out of the current range is the dynamics of Chinese demand,” she says.
Oil prices are down on Friday, but finished the week in the plus.
The price of April futures on London’s ICE Futures Exchange for Brent was $84.32 a barrel by 7:15 a.m. on Friday, down $0.18 (0.21%) from the previous session’s close. Those contracts fell $0.59 (0.7%) to $84.5 a barrel at the close of trading on Thursday.
The price of WTI futures for March crude oil at NYMEX fell by $0.29 (0.37%) to $77.77 per barrel by that time. By the close of previous trading the cost of those contracts declined by $0.41 (0.5%) to $78.06 a barrel.
Both Brent and WTI gained more than 5% YoY on optimism about prospects for Chinese demand, which rose after Saudi Arabia raised March prices for its main oil grade supplied to Asia.
At the same time, traders fear that the protracted tightening of monetary policy in the U.S. could weaken the country’s economy and, consequently, fuel consumption.
Earlier this week, several U.S. Central Bank executives made it clear that they believe it is necessary to continue raising the U.S. benchmark interest rate because the fight against high inflation is not over.
“Oil will continue to rise in price if fears of a downturn in the economy subside,” said CITIC Futures Co. Gui Chenxi, cited by Bloomberg. – The market is hoping for higher energy demand as we see mobility growth in China, as well as in the U.S. and Europe.
Benchmark crude oil is moderately expensive Wednesday morning after rising to weekly peaks the day before, driven by hopes for a recovery in demand in China and fears of supply disruptions due to an earthquake in Turkey.
The price of April futures for Brent on London’s ICE Futures Exchange stood at $83.78 a barrel by 7:20 a.m., $0.09 (0.11%) higher than at the close of the previous session. Those contracts rose by $2.7 (3.3%) to $83.69 a barrel at the close of trading on Tuesday.
The price of WTI futures for March at electronic trades of the New York Mercantile Exchange (NYMEX) is $77.35 per barrel by that time, which is $0.21 (0.27%) above the final value of the previous session. The contract rose by $3.03 (4.1%) to $77.14 a barrel, the highest since January 31.
As earlier reported, the work of Turkish Ceyhan oil terminal was suspended after the earthquake that killed over 7,000 people in Turkey and Syria.
In addition, the market continues to assess the words of the head of the International Energy Agency (IEA) Fatih Birol that China’s economic recovery may proceed at a faster pace than expected, which in turn will lead to a global increase in demand for oil and LNG.
Meanwhile, American Petroleum Institute (API) data released on Tuesday night showed a 2.18 million barrel decline in U.S. inventories for the week ended February 3.
The official report on U.S. energy reserves will be released Wednesday at 5:30 p.m. Analysts polled by Trading Economics expect an average increase of about 2.5 million barrels of oil reserves.
Oil prices stabilized on Monday after a sharp drop last week.
The value of April futures for Brent on London’s ICE Futures Exchange stood at $80.14 a barrel by 7:15 a.m. Monday, $0.2 (0.25%) above the previous session’s closing price. Those contracts fell $2.23 (2.7%) to $79.94 a barrel at the close of trading on Friday.
The price of WTI futures for March increased by $0.09 (0.12%) to $73.48 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX). By closing of previous trades the cost of these contracts went down by $2.49 (3.3%) to $73.39 per barrel.
Brent has fallen by 7.5% and WTI by 7.9%.
The market decline was helped by the weakening optimism of traders regarding the demand growth in China after the lifting of the anti-crisis restrictions, as well as strong data on the US labor market, which showed that the Federal Reserve (Fed) still has some room for maneuver in terms of tightening its monetary policy.
Over the weekend, however, Fatih Birol, head of the International Energy Agency, told Bloomberg that China’s economic rebound after the rejection of harsh quarantine measures may be more powerful than expected.
According to Birol’s forecast, the Chinese economy will account for about half of the growth in oil demand this year.
Another factor the market is closely watching is the EU and G7 decision to impose an embargo on oil product imports from Russia, which came into force on February 5.
Oil prices continued to decline on Friday, ending in minus territory for the second week in a row amid some weakening of traders’ optimism about demand prospects in China and the continuing growth of US inventories.
April Brent crude futures on London’s ICE Futures exchange stood at $82.01 a barrel by 7:10 a.m. Friday, down $0.16 (0.19%) from the previous session’s closing price. Those contracts fell $0.67 (0.8%) to $82.17 a barrel at the close of trading on Thursday.
The price of WTI futures for March crude oil at electronic trades of NYMEX fell by $0.16 (0.21%) by that time to $75.72 per barrel. By closing of previous trades these contracts have dropped by $0.53 (0.7%) to $75.88 per barrel.
Both Brent and WTI ended trading Thursday at their lowest levels since Jan. 10.
Since the beginning of this year, oil has been trading in a range of about $10 a barrel. On the one hand, the market is waiting for an upswing in demand in China after the lifting of quarantine restrictions in the country, on the other hand – it fears a decline in activity in developed countries in connection with the continued increase of interest rates by leading global central banks, said Bloomberg.
In addition, from next week the EU embargo on the supply of Russian oil products, introduced in response to the continuation of Russia’s full-scale war against Ukraine and accompanied by the initiative of the price ceiling, will come into effect, and traders will wait for the consequences of this decision.
“The oil market is in limbo, waiting for tangible signs of demand growth in China,” notes Vanda Insights founder Vandana Hari. – The factor of the ban on Russian oil products to the EU is not the main one, but it still creates some uncertainty.”
Oil prices are actively rising on Thursday morning, recovering after falling to a three-week low the day before on data on another increase in U.S. fuel inventories.
The price of April futures for Brent on London’s ICE Futures Exchange stood at $83.55 a barrel by 7:05 a.m., $0.71 (0.86%) above the previous session’s closing price. Those contracts fell by $2.62 (3.1%) to $82.84 per barrel at the close of trading on Wednesday.
The price of WTI futures for March at electronic trades of the New York Mercantile Exchange (NYMEX) is $77.17 per barrel by that time, which is $0.76 (0.99%) above the final value of the previous session. The contract fell by $2.46 (3.1%) to $76.41 a barrel at the previous session, its lowest level since January 10.
The day before the US Department of Energy announced that crude stocks in the country grew by 4.14 mln barrels last week. Growth rate has been recorded for six weeks in a row. Analysts polled by Bloomberg expected a decrease in oil reserves by 1 million barrels.
Meanwhile, marketable gasoline reserves rose by 2.58 million barrels and distillates by 2.32 million barrels. Experts had expected gasoline inventories to increase by 2 million barrels and distillate inventories to decrease by 1.5 million barrels.
“The Department of Energy data pointed to an unexpected increase in inventories of all fuels,” said Tariq Zahir, managing partner at Tyche Capital Advisors. The weakness in the oil market may well last, and additional declines will be an opportunity to open long positions, he added.
Also on Wednesday, it became known that the ministers of the monitoring committee of OPEC+ (JMMC), considering the data on production for November and December 2022, recommended not to change the quotas on oil production. The next JMMC meeting is scheduled for April 3, 2023.
In addition, a key event for global markets was the Federal Reserve’s first meeting of the year. The Fed expectedly raised its key interest rate by 25 basis points and said it expects more rate hikes to return inflation to its 2% target.
“Those statements sounded pretty hawkish,” said Tyche Capital’s Zaheer.
