Brent Stays High as Crude Oil Prices Nosedive
Brent price stayed above $90 per barrel on Monday as crude oil prices declined as a result of a stronger US dollar which made energy costs expensive for top global consumers.
Saudi Arabia, and Russia who are key members of the Organization of Petroleum Exporting Countries and allies (OPEC+) sustained production cuts have been major catalysts driving prices upward.
Oil prices have been strengthening despite economic concerns in China which weighed on the fuel demand outlook. On the other side, Iran has been flooding the market with crude oil exports but the effect has not triggered reduced energy costs.
Market data showed that Brent crude fell 10 cents, or 0.1%, to $90.55 a barrel while U.S. West Texas Intermediate crude was trading at $87.09 a barrel, down 42 cents, or 0.5%.
“Concerns about Chinese economic growth weighed on sentiment across commodities,” ANZ analysts said in a note. The move was exacerbated by a stronger USD, which kept investor appetite low,” they added, referring to the greenback which has risen for eight straight weeks.
Oil prices have gained in the past two consecutive weeks with Brent settling at its highest since November on Friday after Saudi Arabia and Russia announced last week they will extend voluntary supply cuts of a combined 1.3 million barrels per day until the end of the year.
“The impact of Saudi-led OPEC+ cuts will be clearer by year-end, especially in November and December, when refineries finish maintenance and increase production,” said Mukesh Sahdev, head of downstream and oil trading at Rystad Energy, estimating that refinery outages will peak at 10 million barrels per day (bpd) in October.
“Refinery maintenance will lower crude demand by 2-2.5 million bpd in September and October, but it will rebound in November and December, partially offsetting the price effects of the cuts.”
The International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC) are due to release their monthly reports this week, and any sign of strong demand will likely push oil prices higher, ANZ analysts said.
In the United States, producers added an oil rig last week for the first time since June, Baker Hughes said in its weekly report, but the total count was still down 127, or 17%, below this time last year.
WTI is likely in the process of marking out a new higher range at above $83 and below resistance at $93.50 in the weeks ahead, with concerns around demand in China and Europe capping further upside, IG analyst Tony Sycamore said in a note.
