Crude oil prices continue to remain under pressure

Business Wednesday 15/March/2023 17:35 PM
By: Times News Service
Crude oil prices continue to remain under pressure
Photo used for illustrative purpose only

Muscat: Crude oil prices continued to remain under pressure for the second consecutive week as Brent oil futures traded below the $80 per barrel mark for the first time in more than two months, a new report shows. Future prices reached $77.45 per barrel with the biggest single-day decline since the start of Jan-2023.

“Put contracts options rose to the highest level since mid-August on 13-March-2023 indicating lack of confidence in a near-term rally,” the Kuwait-based investment strategy and research Kamco Invest, said in its Oil Market Monthly Report March 2023.

Oil bets showed a complete reversal from previous data that showed bulls outpacing bears by most in four years, according to ICE Futures Europe data. Crude oil prices were also affected by recent inflation data from China that could indicate a weaker-than-expected recovery in oil demand this year, whereas a modest gross domestic product (GDP) growth forecast announced last week also cast doubts on the extent of demand growth from China, the Kamco Invest said in its report.

World oil prices remained under pressure after the biggest banking sector crisis in the US since 2008 resulting in investor panic in almost all global asset classes and triggering a flight to safety to asset classes like gold and silver. Investors remained concerned about the possibility of a fresh financial crisis amid the prevailing uncertainty in the market despite assurances from the US government as well as support for the banking sector.

Rates hike expectations for the rest of the year also underwent a drastic sentiment change as some economists now expect the Fed to lower its aggressive policy and implement merely one 25 bps hike this year followed by rate cuts during the second half of the year.

Secretary General of the Organisation of Petroleum Exporting Countries (Opec) also pointed out the divided demand globally at a recent conference and added that while Asia is experiencing strong demand growth, the trends in Europe and the US are a concern. He reiterated that the lack of new investment in the sector to expand capacity is threatening global energy security.

On the supply side, the US Energy Information Administration (EIA) in its latest Short-Term Energy Outlook, said that global liquid fuel output is expected to outpace demand in 2023 and 2024.

On the other hand, Bloomberg data showed Russian seaborne crude oil flows rebounded mainly led by higher purchases by India, although the importer has said it would not breach the price cap sanctions imposed on Russia. Weekly data on US crude oil production showed a flattish trend after a decline of 100,000 thousand barrels per day during the week ended March 3 to reach 12.2 million barrels per day. Oil production in the Opec, according to Bloomberg data, showed an increase of 120,000 tonnes per day mainly led by higher production in swing producers Nigeria and Libya.

The Kamco Invest report further said that average crude oil prices showed a mixed trend during February-2023 against January-2023, although the changes were largely minimal. Opec crude basket averaged $81.88 per barrel with a growth of 0.3 per cent. The increase in Kuwait crude grade was similar at 0.3 per cent and averaged at $83.19 per barrel while average Brent declined by 0.4 per cent during the month to $82.50 per barrel. The consensus expectation for Brent crude oil showed minimal changes as compared to last month, with marginal cuts for estimates in the first quarter of 2023 and an upgrade for the fourth quarter of 2023.