Rising Russian production, slower-than-expected downstream demand in industries like jet fuel, and cautious trading ahead of the Fed's interest rate decision dragged down oil prices on Tuesday.
Brent futures for May delivery declined 15 cents to $86.74 a barrel at 0708 GMT, while WTI fell 13 cents to $82.03. WTI April declined 13 cents to $82.59 at expiration tomorrow.
Last session, decreased Saudi Arabian and Iraqi crude shipments and stronger Chinese and U.S. demand and economic growth sent both benchmarks to four-month highs.
Supply concerns from higher exports after Ukrainian attacks on Russia's oil infrastructure pushed prices down. The attacks and scheduled maintenance closures may restrict Russian crude runs by 300 kbd (thousand barrels per day). In a client note, JP Morgan analysts noted that lower primary runs will boost crude oil exports, helping Russia cut output while maintaining exports.
Russian western ports would export over 200,000 barrels per day (bpd) more oil in March than planned (2.15 million bpd). Prices were pushed down by uncertainties regarding U.S. interest rates before the March 20 Federal Reserve meeting at 1800 GMT.
"The market may be consolidating awaiting rate cuts from this week's FOMC meeting," said DBS Bank energy sector team lead Suvro Sarkar via email. "Oil prices have risen significantly in the last two weeks due to the geopolitical risk premium after the Russian refinery strikes. Profit-taking may occur at these levels as Brent price increases above US$85/bbl are unlikely to continue."
In a client note, BMI researchers predicted global jet fuel prices to rise "higher by 5.4% over our previous forecast to USD111/bbl as soft demand is expected to give way to peak summer travel and stronger prices". "However, a global economic slowdown will temper consumption of air travel and weigh on jet fuel prices limiting price upside," they said. Technical analysts were bullish on oil prices ahead.
"WTI oil price has entered a short-term uptrend phase after trading above its rising 20-day moving average for four sessions after a retest on 5 March. OANDA senior market analyst Kelvin Wong said US$84.90 per barrel is intermediate resistance.
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