Oil prices deepened their decline on Tuesday afternoon on concerns about global fuel demand and a stronger dollar.
December futures for Brent on London’s ICE Futures exchange fell by $2.14 (2.22%) by 14:30 CST to $94.05 per barrel.
Quotes of futures for WTI for November in electronic trading on the New York Mercantile Exchange (NYMEX) by the specified time fell by $2.28 (2.5%) to $88.85 per barrel.
On the eve of Brent fell 1.8%, WTI – 1.6% after the publication of data that the Purchasing Managers’ Index (PMI) in China’s services sector, calculated by Caixin Media Co. and S&P Global, fell to 49.3 points in September from 55 points in August.
An index value below 50 points indicates a drop in business activity in the service sector. The indicator in the world’s second largest economy and largest importer of fuel fell below this mark for the first time in four months.
Meanwhile, Shanghai and several other major cities in China have ramped up coronavirus testing of residents to the most active level since August and imposed travel restrictions, writes Barron’s. Such measures may be linked to the 20th Congress of the Communist Party of China, which will begin in Beijing on October 16.
Additional pressure on the quotes is exerted by a strong dollar, which continues to strengthen on the statements of the Federal Reserve System management.
By the beginning of next year, the level of the key interest rate in the US may slightly exceed 4.5%, according to the chairman of the Federal Reserve Bank (FRB) of Chicago, Charles Evans. According to him, the Fed will need to keep rates high for some time to cool the economy and the labor market.
Meanwhile, Fed Vice Chair Leil Brainard noted the need for tighter monetary policy to slow inflation, but added that the Central Bank’s decisions will depend on incoming statistical data.
“The Fed is likely to raise rates by another 75 basis points in November, which will strengthen the dollar and limit the rise in oil prices,” Schneider Electric analysts wrote.
Oil prices fall on Monday after rising by more than 15% last week amid the decision of OPEC + to cut production immediately by 2 million barrels per day (b / d).
Market fears related to the possibility of falling energy demand following the weakening of the global economy as a result of the rapid tightening of policies by world central banks remain, Bloomberg notes.
US unemployment statistics released last Friday showed that the US labor market is still strong. This was taken by traders as a signal that the Federal Reserve (Fed) may again raise the rate by 75 basis points (bp) at the next meeting.
The price of December futures for Brent crude on London’s ICE Futures exchange is $97.08 per barrel by 8:10 qoq on Monday, which is $0.84 (0.86%) lower than the closing price of the previous session. As a result of trading on Friday, these contracts rose by $3.5 (3.7%) to $97.92 per barrel.
The price of futures for WTI oil for November in electronic trading on the New York Mercantile Exchange (NYMEX) fell by this time by $0.77 (0.83%), to $91.87 per barrel. By the close of previous trading, the value of these contracts increased by $4.19 (4.7%) to $92.64 per barrel.
As a result of the week, Brent has risen in price by 15%, WTI – by 16.5%.
As reported, OPEC+ last week decided to cut its November production quota by 2 million barrels per day compared to October, the largest cut since the start of the coronavirus pandemic.
“In reality, the decline will be only about 1 million b / d, since oil production in many countries was already lagging behind quotas,” Commerzbank analysts cited by Bloomberg said. “This, however, will be enough to prevent an excess of supply on market forecast for the fourth quarter.
Oil prices changed little on Friday morning after rising for four sessions in a row on the decision of OPEC+ to cut production by 2 million b/d.
The cost of December futures for Brent crude on the London ICE Futures exchange by 8:10 am CST on Friday is $94.22 per barrel, which is $0.2 (0.21%) lower than the closing price of the previous session. As a result of trading on Thursday, these contracts rose by $1.05 (1.1%) to $94.42 per barrel.
The price of futures for WTI oil for November in electronic trading on the New York Mercantile Exchange (NYMEX) fell by this time by $0.19 (0.21%), to $88.24 per barrel. By the close of the market on Thursday, the value of these contracts increased by $0.69 (0.8%) to $88.45 per barrel.
Brent recently updated a maximum for a month, WTI – has grown to a maximum since September 14, according to Dow Jones Market Data. Both varieties could end the week up 11%.
Oil quotes have been rising since Monday, first on expectations of the OPEC + decision, and then on the decision itself.
Ministers of the OPEC+ countries on Wednesday approved a reduction in the quota for oil production in November by 2 million b/d compared to September. This is the largest decline since the start of the coronavirus pandemic.
However, the real reduction in production will be less than the declared one – by 1-1.1 million barrels per day, the Minister of Oil of Saudi Arabia said, explaining that in some countries of the alliance, real production is in fact below the quota.
At the same time, further production cuts could accelerate the acceptance of a price cap for Russian oil by Western countries, analysts said.
December futures for Brent on London’s ICE Futures exchange fell by $0.33 (0.36%) to $91.47 per barrel by 14:25 CST.
Quotes of WTI futures for November in electronic trading on the New York Mercantile Exchange (NYMEX) by the specified time fell by $0.46 (0.53%) to $86.06 per barrel.
Bloomberg reported, citing delegates to the upcoming meeting, that OPEC + may discuss the possibility of reducing production quotas by 2 million barrels per day (b / d) at once compared to the current level.
“A 2 million b/d cut will show that OPEC+ is keen to support oil prices,” said Vishnu Waratan, an analyst at Mizuho Bank in Singapore.
The UAE is likely to support cutting OPEC+ oil production quotas, despite the US administration’s efforts to prevent such a move, the FT newspaper writes, citing two people familiar with the situation.
Earlier, UAE Energy Minister Suheil al-Mazroui told reporters in Vienna that OPEC+ “remains a technical organization and it is very important that the decision remains technical and not political.”
In addition, traders’ attention on Wednesday will be directed to last week’s data on US energy stocks, which will be released by the Department of Energy at 17:30 CST. A report from the American Petroleum Institute (API), published yesterday, showed a decrease in inventories by 1.77 million barrels after rising by 4.15 million barrels a week earlier.
Oil prices continue to rise on Tuesday, the market is waiting for the meeting of the OPEC + states, during which a decision may be made to reduce the quota for oil production.
Bloomberg reports, citing sources in OPEC+, that the alliance will discuss the possibility of cutting production by more than 1 million barrels per day (b / d).
The meeting of the OPEC+ Ministerial Monitoring Committee (JMMC), as well as the OPEC+ Ministerial Meeting, will be held in person at the OPEC Secretariat in Vienna on October 5. Since March 2020, meetings have been held via videoconferencing.
The cost of December futures for Brent oil on the London ICE Futures exchange by 8:10 am UTC on Tuesday is $89.27 per barrel, which is $0.41 (0.46%) higher than the closing price of the previous session. As a result of trading on Monday, these contracts rose by $3.72 (4.4%) to $88.86 per barrel.
The price of futures for WTI oil for November in electronic trading on the New York Mercantile Exchange (NYMEX) rose by this time by $0.24 (0.29%), to $83.87 per barrel. By the close of the market on Monday, the value of these contracts increased by $4.14 (5.2%) to $83.63 per barrel.
“We expect a significant reduction in the OPEC+ quota on paper, but in reality it will be much less,” said Warren Patterson, who is in charge of commodity markets strategy at ING Groep NV in Singapore.
“A decrease of 1 million b/d would mean a real decrease in production by less than 400,000 b/d,” Bloomberg quoted the expert as saying.
Since September last year, a number of OPEC+ countries have lagged behind their planned production levels due to lack of investment, due to military clashes and sanctions. At the same time, the overall OPEC + quota increased, which allowed countries that can increase production to do so. In September of this year, OPEC+ ministers decided to reduce the quota for October by 100,000 bpd.
Oil prices fell 25% in the past quarter amid signals of a weakening global economy as a result of the rapid tightening of monetary policy by global central banks, including the Federal Reserve System (Fed). Experts fear a global recession and, consequently, a decline in demand for oil.
Oil prices are rising steadily on Monday morning after falling in September and the third quarter.
OPEC+ countries are considering cutting oil production by more than 1 million barrels per day, The Wall Street Journal reported, citing participants in an alliance meeting to be held on October 5.
The price of December futures for Brent crude on the London ICE Futures exchange by 8:05 am CST on Monday is $87.29 per barrel, which is $2.15 (2.53%) higher than the closing price of the previous session. As a result of trading last Friday, these contracts fell in price by $2.04 (2.3%) to $85.14 per barrel. November futures, which expired on Friday, stood at $87.96 a barrel, down 53 cents (0.6%).
Brent ended the previous week up 2.2%, but fell in September and the third quarter by 8.8% and 23%, respectively.
The price of futures for WTI oil for November on the electronic trading of the New York Mercantile Exchange (NYMEX) is $81.57 per barrel by this time, which is $2.08 (2.62%) more than the final value of the previous session. By the close of the last session, the cost of these contracts fell by $1.74 (2.1%) to $79.49 per barrel.
Over the week, WTI rose in price by 1%, but also lost 11% and almost 25% in the month and quarter, respectively.
Oil traders’ concerns about a slowdown in global economic growth have recently contributed to the decline in oil prices at the fastest pace since the start of the COVID-19 pandemic in 2020.
