Oil slips as dollar firms, Russia pipeline halt limits slide

Russia halts exports to Poland via Druzhba pipeline; Dollar at multi-week peak, discouraging sales; Fears of hawkish Fed return; US crude build highest since May 2021

By Reuters

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A pumpjack of Wintershall DEA extracting crude oil at an oldoil field in Emlichheim, Germany. — AP file photo
A pumpjack of Wintershall DEA extracting crude oil at an oldoil field in Emlichheim, Germany. — AP file photo

Published: Mon 27 Feb 2023, 8:19 PM

Oil prices edged lower on Monday as a stronger dollar discouraged buying, though losses were limited by supply concerns after Russia halted exports to Poland via a key pipeline.

Benchmark Brent crude futures were down 34 cents, or 0.4 per cent, at $82.82 a barrel at 1430GMT, while West Texas Intermediate US crude futures (WTI) traded at $75.94, down by 38 cents or 0.5 per cent.

Both benchmarks closed more than 90 cents higher on Friday.

The dollar hovered near a seven-week peak on Monday after a slew of strong US economic data reinforced the view that the Federal Reserve will have to raise interest rates further and for longer.

A firm dollar makes commodities priced in the US currency more expensive for holders of other currencies.

Fears of a hawkish Fed returned to the fore after data on Friday showed the US personal consumption expenditures (PCE) price index shot up 0.6 per cent last month after gaining 0.2 per cent in December.

“Crude continues to take direction from the sentiment in the broader financial markets,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

“If risk aversion continues to grow, crude will likely come under renewed pressure.”

Meanwhile, Russia halted supplies of oil to Poland via the Druzhba pipeline, Polish refiner PKN Orlen said on Saturday, a day after Poland said it had delivered its first Leopard tanks to Ukraine.

Russian pipeline operator Transneft blamed the halt on a lack of completed paperwork for supplies for the second half of February.

Russia announced plans earlier this month to cut oil exports from its western ports by up to 25 per cent in March versus February, exceeding its previously mooted production cuts of five per cent.

Still, most analysts see a European Union ban on Russian seaborne oil imports and an international price cap having only a small impact on overall global supply.

“Russian oil output has exceeded expectations in recent months due to lax EU/US sanctions,” Bank of America said in a note.

Adding some downside pressure, US crude oil inventories surged to the highest level since May 2021 last week, data from the Energy Information Administration (EIA) showed. — Reuters

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