Oil prices fell on Tuesday on expectations of increased supply from Russia, slower-than-expected demand in sectors such as jet fuel and cautious trading ahead of the Federal Reserve’s decision on U.S. interest rates.
Brent crude oil futures contract for May delivery fell 15 cents to $86.74 per barrel as of 07:08 GMT, while West Texas Intermediate (WTI) prices fell 13 cents to $82.03. The WTI April contract, which expires tomorrow, fell 13 cents to $82.59.
Both indicators hit four-month highs in the previous session, driven by declining crude oil exports from Saudi Arabia and Iraq and signs of strong demand and economic growth in China and the United States.
Supply concerns arising from increased exports in Russia continued to put downward pressure on prices.
Attacks on refineries, in addition to planned maintenance shutdowns, would likely reduce Russian crude oil flows by up to 300 kbd (thousand barrels per day) and lead to higher crude oil exports, helping Russia achieve production cuts.
Prices are under pressure due to uncertainty about how US interest rates will play out ahead of the Federal Reserve meeting at 18:00 GMT on March 20. The market may be in consolidation mode as it awaits interest rate cut signals from this week’s FOMC meeting.
Oil prices have been quite high for the last two weeks, due to the rising geopolitical risk premium following the attacks on Russian refineries. There may be some profit-taking at these levels as price movements above US$85/barrel are doubtful.
On the demand side, the market is a little cautious about the increase in demand from the jet fuel sector ahead of the summer travel season in the third quarter.
It is possible for global jet fuel prices to reach their peak and stronger prices with summer travel following light demand.
However, the global economic slowdown will reduce air travel consumption and put pressure on jet fuel prices, limiting the upward movement in prices.
WTI crude oil price movements have turned into a short-term uptrend phase as it managed to trade above its rising 20-day moving average in the last four sessions following a retest of the 20-day moving average on March 5.
