Oil Retreats after Climbing 4-Month High, Iraq Trims Exports
The oil market retreated after positive demand expectations lifted prices higher. Oil prices fell due to the impact of the strong US dollar on demand and the cautious stance ahead of the US Federal Reserve’s (Fed) decision on interest rates.
Brent slid to $86.85 per barrel, which is a 0.04% decrease from the closing price of $86.89 per barrel in the previous trading session. The American benchmark West Texas Intermediate (WTI) traded at $82.12 per barrel at the same time, a 0.05% fall from the previous session that closed at $82.16 per barrel.
On Monday, ICE Brent settled more than 1.8% higher on a day that saw Brent briefly trading above US$87 per barrel and its highest levels since November, ING said in a note. The catalyst for the move appears to have been further Ukrainian attacks on Russian refinery capacity over the weekend.
Likely providing further support were reports that Iraq’s oil ministry plans to trim oil exports to 3.3mbpd over the coming months. This compares with the 3.43 million barrels per day of exports in February. The move is primarily to absorb the oversupply from Jan –Feb 2024 and to showcase the nation’s commitment to stick to its voluntary oil cuts as part of the OPEC+ agreement.
Recent OPEC numbers showed that Iraq pumped 0.2 million barrels per day of oil above its agreed quota of 4mbpd last month. The Energy Information Agency’s (EIA’s) latest drilling productivity report estimates that US shale oil production will rise by 10k b/d month on month to 9.77mbpd in April, following the steady rise in the US rig count this year.
The increase is set to be driven by the Permian and Bakken regions. Meanwhile, EIA also revised up its shale oil forecast for March to 9.76mbpd from 9.72mbpd. The report also showed that the number of drilled but uncompleted wells (DUCs) fell by 3 over the month to 4,483 at the end of February.
Investor profit-taking in early trade, which followed record highs since November 2023 seen in the previous session as a result of supply constraints and geopolitical tensions, was the driving force behind the price slumps.
With support from the latest data, the US dollar index increased by 0.22% to 103.46 on Tuesday, aiding the fall in oil prices. The strong US dollar is expected to lower demand by making oil more expensive for holders of other currencies.
Meanwhile, uncertainty over the US Fed’s upcoming monetary decision continues to weigh on prices. Experts forecast that the bank will leave the policy rate unchanged and not start rate cuts in May as previously expected.
This will keep oil prices suppressed for now as high interest rates boost the value of the US dollar, a move that is set to deter oil trade by making oil more expensive for holders of other currencies.
However, rising hostilities in the Red Sea, one of the world’s busiest maritime routes for oil and fuel shipments, curtailed price declines. The regional war between US and UK forces fighting the Houthi organization is raising supply concerns in the region.
Yemen’s Houthi group has been targeting cargo ships in the Red Sea owned or operated by Israeli companies that are transporting goods to and from Israel in solidarity with the Gaza Strip, which has been under an Israeli onslaught since Oct. 7.
US Defense Secretary Lloyd Austin recently announced the creation of a multinational mission, Operation Prosperity Guardian, to counter the Houthi attacks. #Oil Retreats after Climbing 4-Month High, Iraq Trims Exports
