Oil Prices Start the Week With a Dip

Crude oil prices started trade with a slide this week, as traders await news about the possibility of an end to the war in the Ukraine, which would likely boost the international supply of Russian crude.

At the time of writing, Brent crude was trading at $71.92 per barrel, with West Texas Intermediate changing hands for $68.06 per barrel, after booking two consecutive weekly gains, fueled by U.S. sanctions on Iran’s energy industry and OPEC+ efforts to bring production into the quota limits.

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“Expectations of progress in peace negotiations between Russia and Ukraine and a potential easing of U.S. sanctions on Russian oil pressured prices lower,” Fujitomi Securities analyst Toshitaka Tazawa told Reuters, adding “But investors are holding back on large positions as they evaluate future OPEC+ production trends beyond April.”

“Ukraine-Russia ceasefire talks raise the prospects of increased Russian exports on an eventual resolution, while the OPEC+ production hike as early as April points to further supply additions, which may be difficult to be fully absorbed by demand factors,” IG’s Yeap Jun Rong told the publication.

OPEC+ has said it would go ahead with plans to roll back a portion of its output cuts in April despite still depressed oil prices. The rollback is modest, at 138,000 barrels daily and can be reversed quickly if prices remain weak. Also, laggard members have submitted plans to compensate for their overproduction but, as ING analysts put it, “questions remain about whether members will actually stick to the compensation plan and cut output.”

The Dutch bank’s commodity experts noted, however, that the anticipation of supply impact from U.S. sanctions on Iran had driven more crude buying, with Brent crude buying by speculators rising by close to 53,000 lots to a total net long position of 206,138 lots. The change was mostly driven by new buying but there was some short covering as well, ING’s Warren Patterson and Ewa Manthey said.

By Irina Slav for Oilprice.com

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