Oil drops as Russian supply up

Oil prices experienced a slight dip on Tuesday, influenced by several factors, including the potential for increased supply from Russia, slower demand in sectors like jet fuel, and cautious trading in anticipation of the Federal Reserve’s decision on US interest rates, according to Reuters.

Brent crude oil futures for May delivery dropped 15 cents to $86.74 a barrel, while US West Texas Intermediate (WTI) prices decreased by 14 cents to $82.02. The WTI April contract, set to expire tomorrow, also fell 15 cents to $82.57.

Both Brent and WTI reached four-month highs in the previous session, driven by reduced crude exports from Saudi Arabia and Iraq and signs of robust demand and economic growth in China and the US.

Concerns over supply from Russia, due to increased exports following Ukrainian attacks on Russia’s oil infrastructure, continued to exert downward pressure on prices. JP Morgan analysts noted that these attacks could reduce Russian crude runs by up to 300,000 barrels per day, leading to higher crude oil exports.

Uncertainty surrounding US interest rates ahead of the Federal Reserve meeting on March 20 also weighed on prices. DBS Bank’s Suvro Sarkar suggested the market may be in consolidation mode, awaiting signals on rate cuts from the upcoming FOMC meeting.

On the demand side, analysts expressed caution about growth coming from the jet fuel sector ahead of the summer travel season. Global jet fuel prices are expected to rise by 5.4 per cent to USD111/bbl, but a global economic slowdown could temper air travel consumption and limit price increases.