ISLAMABAD
Oil prices fell for the fourth straight session on Tuesday as macroeconomic worries and signals of increased supplies dominated the current tight supply and demand dynamics in the market. As of 1235 hours GMT, Brent, the international benchmark for two-thirds of the world’s oil, shed $0.35 (-0.39 percent) to reach $90.36 a barrel. The West Texas Intermediate (WTI), the main oil benchmark for North America, went down by $0.19 (-0.21 percent) to $88.63 a barrel.
Similarly, the price of Russian Sokol decreased by $2.02 (-2.40 percent) to $82.26. Arab Light prices witnessed a decrease of $1.99 (-2.11 percent) to reach $92.54 a barrel. On the other hand, the price for Opec Basket decreased to $96.35 with a decrease of $1.13 (-1.16 percent). The OPEC Reference Basket of Crudes (ORB) is made up of Saharan Blend, Girassol, Djeno, Zafiro, Rabi Light, Iran Heavy, Basra Light, Kuwait Export, Es Sider, Bonny Light, Arab Light, Murban and Merey.
The oil prices dropped heavily overnight as markets responded to rate hiking commentary from the US Federal Reserve officials. Fed Governor Michelle Bowman said on Monday that monetary policy in the world’s largest economy needs to stay restrictive for “some time” to bring inflation back down to the 2 per cent target. The drop in prices is driven by expectations of higher interest rates for a longer period that increased odds for recession.
The Federal Reserve in September left US interest rates unchanged for the second time this year but kept the door open for further increases. Higher interest rates dampen economic growth and lower crude demand.
Moreover, signs of a rise in oil supplies that could partially ease the current tight supply dynamics in the market have also pulled prices back from recent highs. Iraq’s northern oil export route through Turkey will begin operations this week, Turkey’s Energy Minister said on Monday. “Within this week, we will start operating the Iraq-Turkey pipeline … which will be able to supply half a million barrels of oil [per day] to the oil market,” added Alparslan Bayraktar.
Crude prices have rallied more than 40 percent since the end of June, driven by Opec+ production caps and the brightening prospects of crude demand as the Chinese economy, the second largest in the world, continues to recover. The 23 Opec+ member states have implemented total production curbs of 3.66 million bpd, or about 3.7 per cent of global demand. This includes a 2 million bpd reduction agreed last year, and voluntary cuts of 1.66 million bpd, announced in April and extended to December 2024.
