(Bloomberg) — Oil prices failed to sustain early gains and fell amid lingering doubts that recent supply cuts by the Organization of the Petroleum Exporting Countries (OPEC+) would change the course of the market.
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Brent, the global benchmark, fell towards $78 a barrel after six weeks of declines, while West Texas Intermediate fell below $74. The decline came despite speculation that the U.S. Federal Reserve has completed its interest rate hike and that U.S. sanctions on Venezuelan supplies could be re-tightened.
Oil prices have just fallen for the month in a row, as supplies from non-OPEC countries soar while demand growth prospects slow. The setback comes despite moves by the Organization of the Petroleum Exporting Countries and its allies last week to widen output cuts. The proposal came after a difficult meeting that was fraught with internal disputes and delays.
“Traders are likely to remain cautious given the OPEC disagreement and increased non-OPEC output,” said Charu Chanana, market strategist at Saxo Capital Markets.
Brent’s prompt spread (the difference between the two closest contracts) narrowed to 6 cents per barrel in warwardation. This is down from 49 cents about a month ago and suggests the market’s near-term outlook is softening.
RBC Capital Markets LLC said oil prices could remain volatile and directionless until the market sees clear data on the group’s voluntary production cuts, which will take effect next month. It is said that there is.
“We are re-entering a supply-driven market, rather than the demand-driven market we saw in the post-pandemic era leading up to COVID-19,” RBC analyst Michael Tran said in a note. “It’s a market very similar to what it was in the last 10 years.” “And these types of markets are often rife with bull traps.”
Meanwhile, in the Middle East, Iranian-backed Houthi rebels claimed to have targeted two Israeli ships in the Red Sea as part of a series of attacks on commercial ships in international waters amid the Gaza conflict. The United States announced that one destroyer shot down three unmanned aircraft.
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