U.S. oil prices extend retreat from $90-a-barrel threshold

Oil futures fell early Tuesday, extending a pullback from 2023 highs as investors appeared more worried about the global economic outlook after the Federal Reserve last week indicated it will keep interest rates elevated for a long stretch.

Price action

West Texas Intermediate crude for November delivery
CL00,
-0.67%
CL.1,
-0.67%

CLX23,
-0.67%
fell 85 cents, or 1%, to $88.83 a barrel on the New York Mercantile Exchange.
November Brent crude
BRNX23,
-0.66%,
the global benchmark, fell 74 cents, or 0.8%, to $92.55 a barrel on ICE Futures Europe.

Market drivers

Oil prices hit 2023 highs earlier this month, which extended their rally, as Saudi Arabia said it would continue a production cut of 1 million barrels a day through the end of the year and Russia said it would also move to curb exports by 300,000 barrels a day.

Expectations for a significant supply deficit moving into year-end alongside growing optimism over the potential for an economic soft landing as major central banks slowed or ended rate increases were cited for gains. However, uncertainty around the demand outlook has risen after the Federal Reserve last week indicated rates may continue to move higher and will remain elevated for longer than investors previously anticipated.

See: Oil could hit $150, sending ‘shock through system,’ says top shale CEO

Meanwhile, higher oil prices are attracting added supply, Robert Yawger, executive director for energy futures at Mizuho, said in a note.

The Energy Information Administration’s domestic production estimate is up 700,000 barrels a day since the end of May to 12.9 million barrels a day, shy of the record of 13.1 million barrels a day in March 2020, he noted, while 400,000 barrels a day of Iraqi Kurd barrels sent through the Turkish export facility at Ceyhan are expected to return to the market soon.

“Iranian barrels may come out of the shadows and return to the open market after diplomatic inroads. Plus, new barrels from Suriname, and Guyana, continue to hit the market,” he said.

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