Oil Prices Fall, What Is OPEC+'S Next Move?

Oil Extends Decline as Dollar Soars on Fed Rate Cut Delay

On Monday, oil prices continued to drop due to a strong US dollar driven by expectations of persistently high inflation postponing reductions in the Federal Reserve interest rates, which has curbed global fuel demand.

Brent crude oil futures ending in March dipped by 0.52% to $80.38 a barrel, while the US West Texas Intermediate (WTI) crude futures for April delivery eased by 0.55% to $76.06 per barrel as the greenback rose.

The latest slump extended last week’s losses when the global benchmark dropped around 2.00%, and WTI fell over 3.00% amid signs of a two-month delay in US interest rate cuts because of a rise in inflation.

Following a Nvidia-driven market surge the previous week, Auckland-based independent analyst Tina Teng observed a pullback in risk-on sentiment due to expectations of prolonged higher interest rates supporting the dollar to weigh on commodity prices.

Since November, oil prices have traded within the $70.00- $90.00 per barrel range on increased US supply and worries about China’s slowing crude demand offsetting supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, amid two ongoing wars.

Analysts noted that crude prices fell due to a lack of new catalysts, being caught between positive factors such as reduced OPEC production, intense geopolitical tensions, and negative concerns regarding subdued demand from China.

Red Sea Attacks Deplete Oil Stocks, US Might Offer Support

Analysts reported that the recent geopolitical risk premium from attacks of Yemeni and Iran-backed Houthi in the Red Sea has led to a slight uptick of $2.00 per barrel for Brent.

Still, Goldman Sachs increased its peak price forecast for the summer to $87.00 per barrel from $85.00, citing the Red Sea disruptions leading to more depletions than expected in inventories of the Organization for Economic Co-operation and Development (OECD) member countries.

The bank continued to anticipate oil demand boosting 1.5 million barrels per day (bpd) this year, but it has trimmed China’s projections while lifting that for the US and India.

Meanwhile, investors are monitoring the impact on Russian oil supply following the US’s sanctions against Sovcomflot, Moscow’s major tanker group, on Friday.

Qatar also plans to increase liquefied natural gas output despite sharp global price declines, contributing to global supplies.

Analysts expect US oil stockpiles to decrease soon as refineries resume operations, potentially bolstering prices.

This week, Baker Hughes reported that US energy companies installed the highest number of oil rigs since November and the most in a month since October 2022.

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