Oil prices fell in early Monday trading, after Israel withdrew some soldiers from Gaza amid renewed ceasefire talks, defusing some tension in the Middle East ahead of the Eid Al Fitr holiday.Brent, the benchmark for two thirds of the world’s oil, was down 1.16 per cent at $90.11 a barrel at 12.30pm UAE time.
West Texas Intermediate, the gauge that tracks US crude, was trading 1.16 per cent lower at $85.90 a barrel.Geopolitical tensions in the Middle East, along with concerns over tightening supplies in the crude market, drove oil prices about 4 per cent higher last week, with Brent breaching the $90 level.
Both Brent and WTI reached their highest levels since October last week on traders’ concerns about the possibility of retaliation by Tehran following an Israeli attack on its embassy in Damascus on April 1.Last week’s rise in oil prices was closely linked to the region’s events “that have increased uncertainty in global energy markets”, said Antonio Di Giacomo, a market analyst Latam at brokerage XS.com.
“As long as tensions between producing countries persist and threats to security in crucial oil-producing regions continue, prices are likely to continue experiencing volatility in the short term.”Most Israeli soldiers have withdrawn from southern Gaza following the departure of an army division from Khan Younis, Israeli media reported on Sunday as truce talks resumed in Cairo.
Investors are also tracking consumer price index data expected to be released this week by the US and China, the world’s two largest economies and biggest consumers of crude.The data may provide some hints on when the US Federal Reserve will start cutting interest rates, following a strong jobs report released last week.
“Despite the quiet period brought by the Eid holidays, the markets remain focused on the impact of crude oil prices soaring above $90, sparking discussions on inflation and interest rate trends,” analysts at Iridium Advisers wrote in a note on Sunday.“Key economic indicators like the US FOMC [Federal Open Market Committee] minutes, CPI data and policy decisions worldwide are set to influence market sentiments.”The Fed has planned three interest rate cuts this year amid signs of easing inflation in the world’s largest economy.
“The latest spike in oil prices will be reflected in the upcoming inflation reads and may derail the Fed from its ‘three rate cuts’ plan for this year,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.“Indeed, when we listen to the Fed speakers, we sense that there is an increasing caution regarding that expectation.”
Crude prices have also been supported by Russian refinery disruptions following Ukrainian attacks.Last Tuesday, Ukraine said a drone struck Russian oil company Tatneft’s Taneco refinery, which has a processing capacity of more than 17 million tonnes.
Oil producers group Opec+, meanwhile, made no policy changes following an online meeting last Wednesday, implying that voluntary output cuts of 2.2 million barrels per day would remain in place until the end of June.The group reiterated the need for countries that are producing above their quotas to scale back and compensate for the excess output.
Opec+ also said it would continue to “closely assess” market conditions and that member countries were ready to take additional measures if required. A full ministerial gathering will be held in Vienna in June.For the first quarter of 2024, oil prices recorded a strong gain amid Opec+ output cuts and rising fears of supply disruption because of geopolitical risks.Brent rose by about 13 per cent, while WTI gained around 16 per cent in the first three months of 2023.
Global oil markets are seen to be in a supply deficit in 2024 instead of the surplus previously predicted as Opec+ supply cuts are expected to continue into the second half of the year, the International Energy Agency predicted last month.The Paris-based energy body is slated to release its 2024 oil market report on April 12.
Source:https://www.thenationalnews.com