Reuters| by Scott Disavino| August 25, 2023
Article Takeaways by DP News Staff:
- Brent futures rose 8 cents, or 0.1%, to $83.44 a barrel
- U.S. West Texas Intermediate (WTI) crude fell 22 cents, or 0.3%, to $78.83
- That put WTI on track for its lowest close since July 26.
NEW YORK, Aug 25 (Reuters) – Oil prices were little changed on Friday, erasing earlier gains, as weak economic news, a stronger U.S. dollar and the prospect of more U.S. rate hikes offset recent crude supply cuts and soaring U.S. diesel futures.
Brent futures rose 8 cents, or 0.1%, to $83.44 a barrel by 1:51 p.m. EDT (1751 GMT), while U.S. West Texas Intermediate (WTI) crude fell 22 cents, or 0.3%, to $78.83.
That put WTI on track for its lowest close since July 26.
For the week, Brent was down about 2% and WTI down about 3%. Last week, both benchmarks fell about 2%.
Diesel futures soared to a seven-month high on Friday, boosting the diesel crack spread , a measure of refining profit margins, to its highest since January 2023.
Economic news from Germany, Europe’s biggest economy, was weak and the U.S. dollar (.DXY), rose to a five-month high against a basket of other currencies after U.S. Federal Reserve Chair Jerome Powell said further interest rate hikes may be needed to fight inflation.
Higher interest rates can slow economic growth and reduce oil demand. A stronger dollar can also slow demand by making oil more expensive for holders of other currencies.
U.S. consumer sentiment, meanwhile, fell modestly in August, as short- and long-term inflation expectations worsened, a survey showed on Friday.
On the supply side Craig Erlam, senior market analyst at OANDA, said, “Supply cuts from OPEC+ continue to support the market but uncertainty over the global economic outlook … (is) weighing a little.”
OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, began limiting supplies in late 2022 to bolster the market and in June extended supply curbs into 2024.
Saudi Arabia and Russia said this month they would extend their additional cuts into September.
Several analysts expected Saudi Arabia to extend its oil production cut of 1 million barrels per day (bpd) for a third consecutive month into October.
Rising prices of a Russian crude sold to China should peak soon, with more independent refiners likely to switch to cheaper oil from Iran which ramped up exports to 4-1/2 year highs in August, several trade sources said.
Iran’s oil minister has been quoted saying he expects the country’s crude output to hit 3.4 million bpd by the end of September, even though U.S. sanctions remain in place.
Analysts at Morgan Stanley expect Brent prices to be well supported around $80 per barrel, with crude likely to remain in a deficit over the rest of this year before returning to a small surplus in early 2024.
But the likelihood of crude deficits is no foregone conclusion, said John Evans of oil broker PVM.
Norwegian energy firm Equinor (EQNR.OL), for example, said it started production at its extended Statfjord Ost field six months ahead of schedule.
Additional reporting by Natalie Grover in London, Laura Sanicola in Washington and Muyu Xu in Singapore; editing by David Goodman, Jason Neely, David Gregorio and Cynthia Osterman
Source: Oil prices steady as supply cuts offset strong dollar, weak economic news | Reuters