Feb 27, 2023 14:11
Oil prices dipped in volatile trade on Monday, as a stronger dollar and concerns of recession risks offset gains from Russia's plans to deepen oil supply cuts.
At 04:11 GMT, West Texas Intermediate U.S. crude futures (WTI) were trading 23 cents or 0.3% lower at $76.09 per barrel, while Brent crude futures were down 30 cents or 0.36% at $82.86 per barrel.
Friday's closing prices for both indices were up by more than 90 cents.
Monday, the dollar hovered near a seven-week high after a slew of strong U.S. economic data bolstered the view that the Federal Reserve will need to raise interest rates further and for an extended period of time.
A strong dollar increases the cost of U.S. dollar-priced goods for foreign currency holders.
Vandana Hari, founder of oil market analysis firm Vanda (NASDAQ:VNDA) Insights, stated, "Crude continues to receive direction from the broader financial markets' sentiment."
Fears of a hawkish Federal Reserve returned to the forefront on Friday after the personal consumption expenditures (PCE) price index increased by 0.6% in January, following a 0.2% increase in December.
"Crude will undoubtedly face renewed pressure if risk aversion continues to grow," Hari predicted.
Last week, U.S. crude oil inventories reached their highest level since May 2021, according to data from the Energy Information Administration (EIA). This development added to the downward pressure on crude oil prices.
"The EIA data continue to generate more questions rather than provide clarity on markets," analysts at the consulting firm Energy Aspects wrote in a note, referring to the steep supply adjustment in the data that contributed to the increase.
On the supply side, Russia intends to reduce oil exports from its western ports by as much as 25% in March compared to February, exceeding its previously announced 5% production cut for the month.
Since February 24, 2022, when Russian military entered Ukraine for the first time, oil prices have decreased by approximately six percent annually.
Russia ceased oil deliveries to Poland via the Druzhba pipeline, the CEO of Polish refiner PKN Orlen said on Saturday, a day after Poland delivered its first Leopard tanks to Ukraine.
Two weeks after the invasion, oil prices soared to a record high of nearly $128 per barrel due to supply worries, but have since retreated due to fears of a global economic decline.
Separately, investors are awaiting this week's China manufacturing surveys to determine the direction of crude demand. This weekend marks the beginning of China's annual parliamentary session, during which new economic policy goals and guidelines will be introduced.
Ning Zhang, senior China economist at UBS Investment Bank, said in a note: "We anticipate the government to reiterate the importance of growth support and call for more policy support."
Feb 24, 2023 13:34