Wed. Oct 4th, 2023
    Crude Prices Slide After Earlier Rally, Profit-Taking Seen

    Crude prices saw a significant jump on Tuesday before settling slightly lower as profit-taking ensued. The market had experienced a surge driven by concerns of tight supply, but warnings of an overbought market caused some investors to take their profits. New York-traded West Texas Intermediate (WTI) crude for November delivery settled at $90.48 per barrel, a decrease of 10 cents for the day. The U.S. crude benchmark had reached $92.41 earlier in the session, the highest level since November 2022. London-traded Brent crude settled at $94.34 per barrel, down 9 cents. The global benchmark had reached a 10-month high of $95.94 earlier that day.

    Crude prices have been rising since June, with the rally accelerating in the past few weeks due to production cuts by Saudi Arabia and Russia. These cuts amount to a daily reduction of 1.3 million barrels until the end of the year. Additionally, U.S. oil production in top shale-producing regions is expected to drop, bringing supply concerns to the forefront.

    Despite these factors, some market analysts warn that the recent price rally may have created inflationary pressure that could negatively impact the market. Citi’s global head of commodity research, Ed Morse, suggests that $90 prices may be unsustainable given the faster growth of supply compared to demand growth excluding Saudi Arabia and Russia. Other analysts also comment on the hype over triple-digit pricing, stating that it was once unimaginable but is now becoming a possibility.

    In addition to profit-taking, the market is anticipating two upcoming developments: a Federal Reserve update on monetary policy and weekly U.S. oil inventory data. The Fed is not expected to raise interest rates at this meeting, but Chairman Jerome Powell’s statements regarding inflation will be closely monitored. The market is also awaiting rate decisions from the Bank of England, the People’s Bank of China, and the Bank of Japan.

    As for oil inventory, the American Petroleum Institute will release data on U.S. crude stockpiles, while the U.S. Energy Information Administration will provide official inventory data on Wednesday. Analysts expect a build of 0.25 million barrels for last week.

    In summary, crude prices initially rallied before profit-taking caused a slight decrease. The market is concerned about tight supply and the impact of recent price increases. Attention is now turning to upcoming central bank decisions and oil inventory data.
    – Reuters