Oil Prices Struggle as Predicted
Oil prices are not in recovery as many have been claiming, even a fall in the dollar, which usually makes crude cheaper, could not stop the slide in the commodity after Iraq flagged a pick-up in output and rebels in key producer Nigeria announced a ceasefire.
Investors were also treading water as they await a key speech from Federal Reserve boss Janet Yellen, hoping for some insight into the state of the US economy and the bank’s plans for its next interest rate rise.
After a seven-day rally that put oil into a bull market — a 20 percent jump from recent lows — the commodity has taken a hiding since the start of this week.
In afternoon trade on Tuesday West Texas Intermediate fell one percent to 46.96 and Brent lost 0.7 percent to 48.84.
On Monday WTI shed 2.9 percent and Brent 3.4 percent after Iraq signalled a likely increase in output from Kirkuk’s oil fields under a deal between the region and the country’s new oil minister.
At the weekend the Niger Delta Avengers announced a conditional ceasefire and agreed to hold talks with the government following months of attacks on oil and gas facilities.
The two developments follow a surge that helped Brent last week break above 50 for the first time since early July. Analysts warned of further drops.
Observers expect markets to remain cautious leading up to Yellen’s speech at the annual global central bankers’ symposium at Jackson Hole in Wyoming Friday.
The speech “remains the headline event this week and I think we could continue to see an element of caution in the markets in the lead-up to this”, Craig Erlam, senior market analyst at OANDA, said in a note.
“Investors are still not buying a 2016 rate hike, even following Stanley Fischer’s comments over the weekend. The only question is whether (Yellen will) strongly hint at a hike this year or indicate that holding off to early next year may be warranted.”