Oil Soars on Russia output decision

At the beginning of the week, oil prices surged by more than 1.30%, with WTI Oil finding support at $80.63. The US Dollar Index is a little weaker but still trades above 104.00.

Russia faces issues from sanctions and drone attacks from Ukraine on Russian refineries and storage facilities, while the projection that the US Federal Reserve will cut three times this year, coupled with a decline in borrowing costs in Europe, could spur the global economy and thus demand for oil.

The US dollar is weakening after rising last week, suggesting that investors are not buying into the debate. The Personal Consumption Expenditure (PCE) Price Index, the Fed’s favourite inflation indicator, is scheduled for release this Friday. Another increase in inflation might cause market volatility. WTI (crude oil) is currently trading at $81.95 per barrel, while Brent oil is trading at $86.19.

The markets are preparing for the possibility that Saudi Arabia would continue to reduce its output by a million barrels per day for the remainder of the year in order to keep oil prices over $80.00. There is continued talk over possibly prolonging the pipeline’s closure. The Iraqi government and oil firms hold each other responsible for the delays in restarting a vital pipeline to Turkey. With interest rates projected to drop in the US and Europe this year, Goldman Sachs is optimistic about commodities generally.

Because of the possibility of penalties, Indian refiners will no longer take tankers controlled by the state-run Russian company Sovcomflot PJSC.