Oil Steady as Dollar Slumps and Russian Oil Products Ban Looms

February 02, 2023, 05.45 PM | Source: Reuters
Oil Steady as Dollar Slumps and Russian Oil Products Ban Looms

OIL PRICE - LONDON. Oil prices were steady on Thursday after tumbling in the previous session as a weaker dollar boosted sentiment, though looming sanctions on Russian oil products added uncertainty over supply.

Brent crude futures fell 10 cents, or 0.1%, to $82.74 a barrel by 0937 GMT while West Texas Intermediate (WTI) U.S. crude futures advanced 1 cents to $76.40.

Both benchmarks plunged more than 3% overnight after U.S. government data showed a large build in oil stocks.

The U.S. Federal Reserve raised its target interest rate by a quarter of a percentage point on Wednesday, yet continued to promise "ongoing increases" in borrowing costs as part of its battle against inflation.

Read Also: Oil Prices Tick Up Ahead of Fed, OPEC Decisions

"Inflation has eased somewhat but remains elevated," the U.S. central bank said in a statement that marked an explicit acknowledgement of the progress made in lowering the pace of price increases from the 40-year highs hit last year.

The U.S. dollar index dived to a nine-month low on Thursday in reaction to the softer rate hike bets. A weaker greenback makes dollar-priced oil less expensive for holders of other currencies, boosting demand.

"Overvalued conditions do not augur well for the dollar’s long-term outlook," investment strategy firm BCA Research said in a note, referring to an improved global economic outlook largely based on China's reopening after strict COVID-19 curbs.

"We expect oil to be the commodity that benefits most from an improvement in Chinese economic momentum."

Prices are also rising against the backdrop of a European Union ban on Russian refined products from Feb. 5.

EU countries will seek a deal on Friday on a European Commission proposal to set price caps on Russian oil products after postponing a decision on Wednesday because of divisions among member states, diplomats said.

Read Also: Oil Prices Firm on Upbeat U.S. Economic Data

The European Commission proposed last week that from Feb. 5 the EU apply a price cap of $100 a barrel on premium Russian oil products such as diesel and a $45 per barrel cap on discounted products such as fuel oil.

Meanwhile an OPEC+ panel endorsed the producer group's current output policy at a meeting on Wednesday, leaving production cuts agreed last year unchanged amid hopes of higher Chinese demand and uncertain prospects for Russian supply.

OPEC+ agreed to cut its production target by 2 million barrels per day (bpd) - about 2% of global demand - from November last year until the end of 2023 to support the market. 

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