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 goes up in price on Tuesday after Saudi Arabia raised prices for most grades of this energy carrier for Asian buyers.
On the eve of the state company Saudi Aramco said that the cost of the main variety of Arab Light delivered to Asia in March will increase by $0.2 per barrel. As a result it will be $2 a barrel more expensive than the oil basket of Oman and Dubai.
The price of this grade has risen for the first time since September.
The price increase for Asia is a signal of higher-than-expected demand for oil in China, said Phil Flynn, chief analyst at The Price Futures Group. “This should provide significant support for the oil market, given increasing investor fears about the amount of spare production capacity in the world,” Bloomberg quotes the expert.
The cost of April futures for Brent crude oil on London’s ICE Futures exchange is $81.74 a barrel by 7:15 a.m. Tuesday, up $0.75 (0.93%) from the previous session’s closing price. Those contracts rose $1.05 (1.3%) to $80.99 a barrel at the close of trading on Monday.
The price of WTI futures for March crude oil grew by $0.74 (1%) to $74.85 per barrel at electronic trades of New York Mercantile Exchange (NYMEX) by that time. By the close of previous trading the cost of those contracts grew by $0.72 (1%) to $74.11 a barrel.
Earlier, Goldman Sachs Group Inc. chief commodity markets analyst. Jeffrey Curry said that reserve production capacity in the oil sector, according to his estimates, is running out and this may become a serious problem for the market in 2024.
Oil prices are also boosted by fears of supply cuts from the Middle East following the earthquake in Turkey. In particular, operations at Turkey’s Ceyhan oil terminal were suspended, Bloomberg notes.
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.
Oil prices are rising on Wednesday after falling the day before on weak statistical data from the U.S., which reduced investor optimism about global energy demand.
Traders’ attention is focused on the U.S. Department of Energy report on the country’s energy reserves, which will be released at 17:30.
The American Petroleum Institute (API) data released on Tuesday night showed an increase of 3.378 million barrels in U.S. oil inventories for the third week in a row. The previous two weeks, oil reserves in the country increased by more than 27 million barrels, reaching the highest since June 2021.
The value of March futures for Brent on the London Stock Exchange ICE Futures was $86.34 a barrel by 8:10 Moscow time on Wednesday, which was $0.21 (0.24%) higher than the price at the close of the previous session. Those contracts fell by $2.06 (2.3%) to $86.13 a barrel at the close of trading on Tuesday.
The price of WTI futures for March increased by $0.14 (0.17%) to $80.27 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX). By the close of previous trading, those contracts had fallen $1.49 (1.8%) to $80.13 a barrel.
“Oil prices are trying to correct after falling the day before on weak data on business activity in the States,” – said an analyst at IG Asia Pte in Singapore Yeop June Rong. – But the pressure on the market remains, the risk appetite of investors remains subdued.
The composite purchasing managers index (PMI) in the United States, calculated by S & P Global, in January rose to 46.6 points from 45 points a month earlier. A reading below the 50-point mark indicates a contraction in business activity. The U.S. PMI has remained below that level for seven months in a row.
Business activity in January continued to fall in both the U.S. manufacturing and service sectors, preliminary data from S&P Global showed.
