WTI tumbles toward $87.40 on a strong US dollar, despite OPEC’s cutting production
- WTI remains heavy, extending its losses to three consecutive days, down 1.40%.
- The OPEC and the US Department of Energy cut their oil production forecasts for 2023.
- Poland reported a leak in the Druzhba pipeline, which pumps oil to Europe, disregarding possible sabotage.
Western Texas Intermediate (WTI), the US crude oil benchmark, extends its losses after hitting a weekly high of $93.62 on reports that the OPEC would cut 2 million barrels per day, letting the black gold from below $80 levels. Nevertheless, oil is sliding due to a stronger US dollar and fears that a global economic slowdown would diminish demand. At the time of writing, WTI is trading at $87.36 PB.
US equities are trading in the green, reflecting an upbeat mood. The OPEC cut its demand by 2.64 million barrels per day or 2.7% in 2022, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report.
The organization said that “the world economy entered a period of heightened uncertainty,” blaming several factors. Developed countries’ central bank’s tightening and high inflation levels might hurt demand for crude oil.
Echoing the cartel’s comments was the US Energy Department, which cut its production and demand estimates, seeing a 0.9% increase in consumption for 2023, down from a rise of 1.7%. Crude production is expected to grow 5.2%, less than 7.2%.
In the meantime, WTI’s fall was capped by news from Poland reporting a leak in the Druzhbka pipeline, which supplies Europe with Russian oil. Poland said that it was probably caused by accident rather than sabotage.
“Security of supply in Germany is currently guaranteed,” a spokesperson told Reuters. “The refineries in Schwedt and Leuna continue to receive crude oil via the Druzhba pipeline.”
Elsewhere, Fed officials led by Minnesota Fed President Neil Kashkari reiterated that the Fed would stick to its current monetary policy stance to bring inflation down. He added, “we have not yet seen much evidence that underlying inflation...is yet softening.”
Aside from this, US economic data revealed earlier by the Labor Department justified the Fed’s need for another 75 bps rate hike when prices paid by producers remained high, with headline inflation augmented by 8.5%, while core PPI decelerated to 7.2% YoY, from 7.3% estimated and previous month’s figure.
WTI Key Technical Levels