Oil Slides as US Dollar Rallies Ahead of OPEC+ Cut
Crude oil prices declined as a stronger US dollar raised energy costs ahead of expected supply cuts by members of the Organisation of Petroleum Exporting Countries and allies (OPEC+).
India’s crude oil imports from Russia declined amidst global economic concern, though there is a positive expectation that US demand would pick up after a strong drawdown. Today, investors remained cautious ahead of anticipated OPEC+ production cutbacks to be announced this week.
International benchmark crude traded at $88.65 per barrel, representing a 0.39% loss from the closing price of $89.00 a barrel in the previous trading session on Monday. The American benchmark West Texas Intermediate (WTI) traded at the same time at $85.70 per barrel, down 0.32% from the previous session’s close of $85.98 per barrel.
Both benchmarks held earlier gains and remained steady, with investors weighing market tightness in the aftermath of prospective supply cuts from Russia and Saudi Arabia. This move came after Brent reached its highest level since November last year on Monday, at $89.22 per barrel, following Russian Deputy Prime Minister Alexander Novak’s announcement last week that OPEC+ members had agreed on new production cuts.
Novak’s remarks came as no surprise to markets, as Saudi Arabia stated after extending its ongoing output cut through September that the pledged production reduction ‘can be extended or extended and deepened’ after September.
The rising value of the US dollar is also putting downward pressure on prices. Elsewhere, Russia’s oil and natural gas revenues declined by 38% to 4.8 trillion Russian rubles ($50 billion) during the first eight months of the year due to lower prices and sale volumes, the Russian Ministry of Finance reported Tuesday.
The country’s oil and gas revenues in August also fell by almost 20% month on month to average 642.7 billion rubles ($6.6 billion), the ministry said. EU member states agreed last December to impose a cap price of $60 per barrel on oil delivered by sea from Russia. On Feb. 5, a similar ban was imposed on refined petroleum products, with a price cap of $60 per barrel.
Russia, however, announced that it would stop oil shipments to countries imposing a price cap and instead direct its exports to Asian markets, particularly China and India, at huge discounts. US$1 equals 97.4 rubles on Tuesday.
India’s crude oil imports from Russia decreased by more than 23% in August compared to the previous month, reaching a seven-month low, according to recent data by energy cargo tracker Vortexa.
Overall crude oil imports in India dipped 5% to 4.35 million barrels per day (bpd) in August from 4.57 million bpd in July, in line with falling demand as monsoon rains reduced industrial activity and mobility.
In August, the world’s third-largest oil consumer purchased 1.46 million bpd from Russia, 450,000 bpd less than in July. These shipments also represented India’s lowest Russian oil supply in the previous seven months.
Indian refinery imports from Iraq, another key source, also decreased from 891,000 bpd to 866,000 bpd in August. Saudi Arabia, however, increased its crude oil supply to India by 336,000 bpd in July, hitting 820,000 bpd.
India’s oil imports from the United Arab Emirates also fell from 290,000 bpd in July to 273,000 bpd in August. Purchases from the US, meanwhile, declined by 59,000 bpd compared to July to reach 160,000 bpd in August.
‘Several Indian refiners have planned maintenance scheduled across September to November, which could cap their crude imports.
“But festive demand in Q4 is expected to boost domestic demand, which, coupled with robust export margins, is expected to see an uptick in India’s crude imports for the remainder of the year,’ Vortexa’s head of Asia-Pacific analysis, Serena Huang, was quoted as saying.
India, the world’s third-largest oil importer after China and the US, is experiencing a drop in crude oil demand during the four-month monsoon season, which typically begins in June, as parts of the country face severe flooding. #Oil Slides as US Dollar Rallies Ahead of OPEC+ Cut Oil Slides over Weak Economic Growth Outlook in China