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Oil declines by more than three dollars due to inflation and Iraq's exports

Oil declines by more than three dollars due to inflation and Iraq’s exports

A picture of the emblem of the Organization of the Petroleum Exporting Countries (OPEC) at its headquarters in Vienna, Austria, March 21, 2016. REUTERS/Leonard Voiger

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LONDON (Reuters) – Oil prices fell by more than $3 a barrel on Tuesday on concerns that the weakness of global economies caused by inflation will reduce demand for oil, with Iraq’s crude exports not affected by the clashes.

Brent crude futures for October settlement fell $3.90, or 3.71%, to $101.19 a barrel by 1340 GMT, after touching a session low of $100.90 a barrel.

The October contract expires on Wednesday and the most active contract for November was at $99.59, down 3.24%.

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US West Texas Intermediate crude fell $3.60, or 3.71%, to $93.41.

Inflation is approaching double-digit territory in many of the world’s largest economies, a level not seen in nearly half a century. This could prompt central banks in the United States and Europe to resort to sharper increases in interest rates, which could limit economic growth and affect fuel demand. Read more

“The economy will remain sluggish with the Fed’s strong monetary policies. Investors are now waiting for the monthly employment data on Friday,” said Kunal Sawhney, CEO of equity group Kalkine Group.

Prices fell after comments from Iraq’s state-owned oil marketing company SOMO that the country’s oil exports were not affected by the turmoil, UBS analyst Giovanni Stonovo said. Read more

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Baghdad’s worst fighting in years between Shiite groups spread to the second Tuesday. Read more

Sumo also said on Tuesday that it could redirect more oil to Europe if needed. Read more

More price pressure came from Gazprom Neft, the fastest growing oil producer in Russia (SIBN.MM) Saying it plans to double oil production at the Zhagrin field in Western Siberia to more than 110,000 barrels per day. Read more

Meanwhile, the market awaits the meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, on Sept. 5.

Saudi Arabia last week raised the possibility of OPEC+ production cuts, which sources said could coincide with an increase in supplies from Iran if it strikes a nuclear deal with the West.

The American Petroleum Institute is due to release data on US crude stocks at 4:30 PM ET (2030 GMT) on Tuesday.

A preliminary Reuters poll showed on Monday that US crude oil inventories are likely to have fallen in the week ending August 26.

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(Reporting by Rowena Edwards) Additional reporting by Moyo Cho in Singapore Editing by Louise Heavens and David Goodman

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