Sat. Sep 23rd, 2023
    Crude Prices Drop After Reaching Highs

    Investors took profits after crude prices reached their highest levels in months, with the market showing signs of being overbought. Both West Texas Intermediate (WTI) and Brent crude saw declines on Tuesday after a three-week rally driven by expectations of tight supply. WTI settled at $90.48 per barrel, down 10 cents, while Brent settled at $94.34 per barrel, down 9 cents. Despite the recent gains, some analysts warn that the market may not be able to sustain these higher prices. Citi’s Ed Morse stated that $90 prices look unsustainable given the faster supply growth compared to demand growth. Additionally, RBC Capital Markets referred to the hype of triple-digit pricing as a self-fulfilling prophecy that could push prices toward $100 per barrel.

    Oil prices have been steadily climbing since June, with the rally intensifying in the past three weeks after Saudi Arabia and Russia agreed to remove a combined 1.3 million barrels per day from the market. Concerns over supply were further heightened by a government report stating that US oil production from shale-producing regions could drop to its lowest levels since May. However, the rally has raised concerns about inflationary pressure, particularly as gasoline prices continue to rise.

    In addition to profit-taking, crude prices were influenced by the Federal Reserve’s update on monetary policy and weekly US oil inventory data. Though the Fed is not expected to raise interest rates, investors will be closely watching Chairman Jerome Powell’s remarks for hints about the central bank’s future plans. The Bank of England, the People’s Bank of China, and the Bank of Japan are also set to make rate decisions this week, which could impact the global economy and oil demand going forward.

    Furthermore, market participants awaited the release of the US oil inventory data from the American Petroleum Institute (API) and the US Energy Information Administration (EIA). Last week, analysts expected the EIA to report a build of 0.25 million barrels, compared to the 3.954 million barrel rise the previous week.

    – Reuters