Oil Slides on Rising Energy Cost Ahead of OPEC Meeting
The market prices of crude oil slid on Tuesday due to rising energy costs supported by a strong US dollar ahead of the Organisation of Petroleum Exporting Countries meeting on Wednesday.
Brent was priced at $90.25 per barrel, representing a 0.51% decline from the closing price of $90.71 a barrel in the previous trading session on Monday. The American benchmark West Texas Intermediate (WTI) traded at the same time at $88.22 per barrel, down 0.67% from Monday’s close of $88.82 per barrel.
The U.S. dollar has been on fresh rally over the government’s decision to avert a shutdown over the weekend, driving up oil costs for holders of foreign currencies and driving down prices for many others.
Investors are now monitoring the Fed’s formal announcements to look for clues about the US central bank’s upcoming interest rate moves. US Federal Reserve Governor Michelle Bowman said Monday that high energy prices could reverse recent progress seen in inflation.
Both benchmarks reached their highest levels since November 2022 in September, with Brent reaching over $97 per barrel after Saudi Arabia and Russia announced plans to reduce output for the following three months, fueling concerns that the supply-demand gap was closing.
The market has shifted attention to OPEC’s Joint Ministerial Monitoring Committee (JMMC) on Wednesday amid expectations of a rollover of the group’s ongoing supply cuts.
Oil extends pullback
Oil prices are pulling back from making further trajectory, with Brent off more than 5% since Thursday.
In a note, OANDA analyst Craig Erlam said there’s an element of profit-taking ahead of the OPEC+ meeting after such a strong rally since mid-August or maybe risk-aversion elsewhere is weighing, driven by economic fears.
The question now is whether trading in recent days or the recent shift in risk appetite will influence the outcome of the meeting. On Monday, ICE Brent settled a little more than 1.6% lower on the day as rising treasury yields and USD strength proved to be too much of an obstacle for the market.
Technically, analyst said Brent’s December contract still needs to fill the gap left following the November contract expiry on Friday. If that happens, it would take the front-month contract back above US$95/bbl.
Preliminary OPEC production data for September is starting to come through. Nigeria showed the largest increase over the month. Their supply grew by 60Mbbls/d, while Iran saw a marginal pullback in output of 50Mbbls/d.
Output is likely to remain relatively steady over October. Further out, the market will be focused on any sign that Saudi Arabia is starting to unwind its voluntary additional supply cuts.
There was a bit more noise yesterday around the resumption of Northern Iraqi oil flows through the Ceyhan pipeline. Turkey has said that flows could resume this week. However Iraqi officials have thrown cold water on the idea, saying that there are still some issues that need to be resolved before this can happen.
The pipeline can carry almost 500Mbbls/d of crude oil from the Kurdish region to the Ceyhan export terminal. Flows were suspended back in March after the Iraqi government won an international arbitration ruling, stating that these flows were occurring without approval from the Iraqi government. #Oil Slides on Rising Energy Cost Ahead of OPEC Meeting