Oil Prices Slip on Rising Supply from Russia and Cautious Trading Ahead of Fed Decision
In the world of oil trading, Tuesday brought a slight dip in prices as various factors came into play. The prospect of increased supply from Russia, sluggish demand in sectors like jet fuel, and a sense of caution ahead of the Federal Reserve’s decision on US interest rates all contributed to the downward trend, as reported by Reuters.
The Brent crude oil futures contract for May delivery saw a decrease of 15 cents, landing at $86.74 a barrel by 7:33 a.m. Saudi time. Meanwhile, US West Texas Intermediate prices also fell, dropping 14 cents to $82.02. The WTI April contract, set to expire tomorrow, experienced a 15 cents decrease, settling at $82.57.
Although both benchmarks had reached four-month highs in the previous session, thanks to factors like lower crude exports from Saudi Arabia and Iraq, the current situation was a bit different. Concerns over supply from Russia, due to increased exports following attacks on the country’s oil infrastructure by Ukraine, continued to put pressure on prices.
According to analysts at JP Morgan, the attacks could potentially reduce Russian crude runs by up to 300 thousand barrels per day. Despite this, lower primary runs might actually lead to higher crude oil exports, allowing Russia to maintain output cuts while keeping exports steady.
March will see Russia boosting oil exports through its western ports by nearly 200,000 barrels per day compared to the monthly plan of 2.15 million bpd. Daily shipments will also increase by 10 percent compared to the initial plan for March, according to calculations by Reuters.
As the market awaited signals on potential rate cuts from the upcoming Federal Reserve meeting on March 20, uncertainty surrounding US interest rates added to the mix. DBS Bank’s Suvro Sarkar noted that oil prices had already seen significant increases in recent weeks, factoring in higher geopolitical risks after the Russian refinery attacks. However, he expressed doubts about sustainability above $85 per barrel for Brent in the near term.
On the demand side, analysts expressed some caution regarding growth in the jet fuel sector leading up to the summer travel season in the third quarter. While global jet fuel prices are expected to rise by 5.4 percent to $111 per barrel, soft demand could be balanced by peak summer travel and stronger prices. Still, concerns about a potential global economic slowdown impacting air travel consumption and jet fuel prices were noted.