Oil prices experienced a decline on Tuesday, influenced by factors such as the prospect of increased supply from Russia, sluggish demand in downstream sectors like jet fuel, and cautious trading as investors awaited the Federal Reserve’s decision on U.S. interest rates.
In early trading, the Brent crude oil futures contract for May delivery retreated by 15 cents to $86.74 a barrel, while U.S. West Texas Intermediate (WTI) prices fell by 14 cents to $82.02. Additionally, the WTI April contract, set to expire tomorrow, decreased by 15 cents to $82.57.
Although both benchmarks reached four-month highs in the previous session, boosted by reduced crude exports from Saudi Arabia and Iraq and positive signs of demand and economic growth in China and the U.S., concerns about increased oil exports from Russia persisted. Attacks on Russia’s oil infrastructure by Ukraine were expected to reduce Russian crude runs by up to 300,000 barrels per day, leading to higher crude oil exports as a consequence.
Russia plans to boost oil exports through its western ports in March, increasing shipments by almost 200,000 barrels per day compared to its initial plan. This move further added to downward pressure on oil prices.
Moreover, uncertainty surrounding U.S. interest rates ahead of the Federal Reserve meeting also weighed on market sentiment. Investors awaited signals from the Fed regarding potential rate cuts, which could impact oil prices.
Additionally, analysts expressed cautiousness regarding demand growth in the jet fuel sector, particularly ahead of the summer travel season in the third quarter. While global jet fuel prices are expected to rise in anticipation of increased summer travel, a global economic slowdown could temper air travel consumption and limit upside potential for jet fuel prices.
Overall, oil prices faced downward pressure from rising Russian supplies, uncertainty about U.S. interest rates, and cautiousness regarding demand in the jet fuel sector, despite recent gains driven by various factors including geopolitical tensions and positive economic indicators.