Oil Prices Slides over Supply Boost Optimism
Global prices of oil declined on optimism that Iraq would boost supply amidst conflict in the Middle East. Iraq’s government has expressed optimism that it will soon achieve an agreement to resume oil production from its Kurdish area.
This comes as Saudi Arabia and Russia, two key members of the Organisation of Petroleum Exporting Countries and allied (OPEC+) maintain a stance on voluntary production cuts.
ICE Brent traded at $80.83 per barrel, translating to a 0.74% fall from the closing price of $81.43 a barrel in the previous trading session on Friday.
The American benchmark, West Texas Intermediate (WTI), traded at the same time at $76.56 per barrel, down 0.79% from Friday’s close of $77.17 per barrel.
Both benchmarks started the week with supply concerns eased after Iraqi Oil Minister Hayan Abdel-Ghani stated on Sunday that he expects to reach an agreement with the Kurdistan Regional Government (KRG) and foreign oil companies on resuming oil production from the region within three days.
During a visit to the capital of the region, Erbil, Abdel-Ghani stated that Iraq and Türkiye had reached an ‘understanding’ over the restoration of northern oil shipments via the Iraq-Türkiye pipeline, thereby alleviating supply problems.
ICE Brent started the week on a soft note after a push higher towards the end of last week, which supported the ICE Brent at around US$82 on Friday on optimistic comments from Saudi Arabia.
This week, the market awaits monthly oil market data from OPEC and the IEA, which will provide more visibility of the physical market conditions and crude oil market balance.
Media reports suggest that Russia could lift remaining restrictions on gasoline and diesel exports in the coming week as refineries restart after maintenance and the domestic fuel supply has improved.
Earlier, Russia imposed restrictions on gasoline and diesel exports as supplies fell, although restrictions on diesel exports were eased later as those supplies improved.
Recent reports suggest that Kuwait’s mega Al-Zour refinery is restarting its operations gradually and is expected to recover to its previous production capacity in about ten days.
The refinery was forced to a near-complete halt of production activities due to technical issues. The Zour refinery is one of the biggest oil processing facilities in the Middle East and has an operating capacity of 615Mbbls/d. The refinery was earlier scheduled to be fully operational last month.
Meanwhile, bearish economic data in China, the world’s largest oil importer, once again raised deflationary concerns and exerted downward pressure on prices.
Casting doubts on a post-pandemic demand recovery in the country, China’s consumer prices dropped by 0.2% annually in October, more than the market forecast, according to official data released on Thursday.
Data from the National Bureau of Statistics of China showed a swing from the flat reading in the prior month. Economists expected a 0.1% year-on-year decline in October consumer prices.