Brent oil retreats below USD90 per barrel mark despite OPEC "warning"

(Alliance News) - A barrel of Brent oil hit dizzying heights near USD140 earlier this year, but for the first time since Russia mounted an invasion of neighbouring Ukraine, the North Sea benchmark fell below the USD90 mark on Wednesday.

Brent traded as low as USD88.47 a barrel on Wednesday, a far cry from its year-to-date high of USD138.

The latest slide in oil prices comes despite OPEC cutting output.

The OPEC+ oil cartel agreed Monday to cut production for the first time in more than a year as it seeks to lift prices that have tumbled due to recession fears.

"While the 100,000 barrel cut wasn't fundamentally significant, it was clearly intended as a warning not to drive the price lower or face further cuts. Unfortunately, it seems traders are in no mood to be told what to do and growth fears are instead dictating the price direction," Oanda analyst Craig Erlam commented.

The US, however, moved to calm oil market nerves. It said on Monday that energy supply "should meet demand to support economic growth and lower prices for American consumers and consumers around the world".

US President Joe Biden had previously called on the cartel to open oil taps, in a bid to lower prices and lessen inflationary pressures.

OPEC+, a 23-nation cartel led by Saudi Arabia and Russia, had agreed to cuts in output in 2020 when the Covid pandemic sent oil prices crashing, but it began to increase production modestly again last year as the market improved.

A similar pattern has emerged in 2022. Economic growth fears have led to oil prices being hurt.

Weaker data from China did little to offer oil prices some respite.

China's export growth slowed significantly in August, customs authorities said Wednesday, as economic uncertainty is exacerbated by strict Covid-19 lockdowns across the country. This added to worries about the ailing economy.

Last month, China's exports expanded 7.1% year-on-year, down from 18% growth in July, China's General Administration of Customs said, while imports were up only 0.3%, compared with a 2.3% rise in July. Analysts surveyed by Bloomberg forecast export growth of 13% and a 1.1% increase in imports.

The West Texas Intermediate oil benchmark slid below the USD85 a barrel mark on Wednesday. Its year-to-date high is USD129.42 and it even caught up with Brent, customarily priced higher, in May.

"Clearing the USD85 support should pave the way toward the USD80 mark, which is the post-pandemic uptrending channel base," Swissquote analyst Ipek Ozkardeskaya commented.

"Below that level, OPEC will certainly show up and say, they are cutting output to further stabilize the market."

By Eric Cunha; [email protected]

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