Oil prices fall as fears of imminent OPEC+ output cut recede
Oil prices fell on Wednesday, taking a breather from a nearly 4% surge the previous day on receding fears of an imminent output cut by the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+.
Global benchmark Brent crude futures fell 21 cents, or 0.2%, to US $100.01 a barrel by 0114 GMT, after rising 3.9% on Tuesday. The U.S. West Texas Intermediate crude futures contract was down 10 cents, or 0.1%, at $93.64 a barrel, having jumped 3.7% the previous day.
Both contracts soared on Tuesday after de facto OPEC leader Saudi Arabia flagged the possibility of introducing cuts to balance a market it described as “schizophrenic”, with the paper and physical markets becoming increasingly disconnected.
But potential OPEC+ production cuts may not be imminent and are likely to coincide with the return of Iran to oil markets should that country clinch a nuclear deal with the West, nine OPEC sources told Reuters on Tuesday.
A senior U.S. official told Reuters on Monday that Iran had dropped some of its main demands on resurrecting a deal.
“Tuesday’s rally was overdone as many investors knew it would take several months for Iranian oil to flow into the international market even if an agreement to revive Tehran’s 2015 nuclear deal was made, meaning OPEC+ would not trim output so quickly,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.
“Still, there is not much room for the market’s downside due to robust heating fuel demand for the winter,” he said, citing that the recent rally in the U.S. heating oil market and surging natural gas prices boosted expectations for stronger heating oil demand and tighter crude supply.
U.S. gas prices shot above $10 for the first time in about 14 years due to a surge in prices in Europe, where tight supplies persist.
Underlining tight supply, U.S. crude stockpiles fell by about 5.6 million barrels for the week ended Aug. 19., according to market sources citing American Petroleum Institute figures on Tuesday, against analysts’ estimate of a drop by 900,000 barrels in a Reuters poll.
But gasoline inventories rose by about 268,000 barrels, while distillate stocks increased by about 1.1 million barrels.
Oil has soared in 2022, coming close in March to an all-time high of US$147 after Russia’s invasion of Ukraine exacerbated supply concerns. Fears about a global recession, rising inflation and weaker demand have since weighed on prices.
