Oil prices were on track for a second consecutive week of losses, even as they saw gains on Friday, as the U.S. dollar exhibited strength ahead of a speech by Federal Reserve Chair Jerome Powell. Simultaneously, worries about tight supply abated.
Brent crude witnessed an increase of 39 cents, equivalent to 0.5%, reaching $83.75 a barrel by 0624 GMT, while U.S. West Texas Intermediate crude also experienced a 39-cent uptick, or 0.5%, landing at $79.44 a barrel.
Over the course of the week, crude prices are expected to decline by a range of 1.2% to 2.2%, marking a second successive week of decrease.
Market analyst Yeap Jun Rong from IG noted, “No doubt the Fed’s policy outlook will be the key driving force for markets ahead.” He further added, “With fresh updates on U.S. inflation and labour market data after the previous FOMC meeting, focus will be on what factors the Fed Chair will have his attention on.”
The anticipation surrounding Powell’s statements at the Jackson Hole Symposium lifted the safe-haven status of the dollar to a 10-week high, marking its most significant surge in a month. Investors were awaiting insights into the expected duration of elevated interest rates.
A stronger dollar has the effect of increasing the cost of oil for holders of alternative currencies, thereby potentially dampening demand.
Turning attention to the supply side, discussions between Turkey and Iraq’s semi-autonomous Kurdistan regional government concerning northern Iraqi crude oil exports are ongoing. Earlier this week, officials had failed to reach an agreement to resume oil exports.
Turkey had ceased the flow of Iraqi oil via the Ceyhan port on March 25, following an arbitration case lost to Iraq.
In parallel, market observers are closely monitoring the flow of Iranian oil. Despite existing U.S. sanctions, Iran’s oil minister was quoted by state media as stating that the country’s crude oil output would reach 3.4 million barrels per day by the end of September.
Additionally, dampening market sentiment, reports indicate that U.S. officials are formulating a proposal that could ease sanctions on Venezuela’s oil sector. This potential shift would allow more countries and companies to import Venezuelan crude oil.
In a separate development, Norway’s Equinor announced that it had initiated production at its extended Statfjord Ost field, six months ahead of schedule. The company anticipates a rise in output equivalent to 26 million barrels of oil.
“The support to oil prices from previous production cuts has ebbed. The market is looking for Saudi Arabia to continue extending its voluntary output reductions,” analysts from Haitong Futures stated.
It is estimated that the top oil exporter, Saudi Arabia, will probably extend its voluntary oil cut of 1 million barrels per day for a third consecutive month into October. This decision stems from uncertainty surrounding supplies and the nation’s aim of further reducing global inventories.