Oil fell as concerns about a longer period of elevated interest rates weighed on broader sentiment, countering signs of a tightening physical oil market.

Amid a lack of clear supply-and-demand catalysts, crude has been mirroring broader markets. West Texas Intermediate’s more-active April contract slid almost 2 per cent from Friday’s close as equities also retreated. 

Despite the intraday decline, oil remains near the top of the range it has traded in since early November. Increasing geopolitical tensions in the Middle East and efforts by OPEC+ to trim output have been jostling with bearish headwinds such as weak consumption, most notably from top importer China. However, the price difference between monthly contracts has been widening, indicating a more robust outlook in parts of the physical market. 

“The market is in a bit of a wait-and-see mode for now,” said Rob Thummel, senior portfolio manager at Kansas-based Tortoise Capital Advisors LLC. “The next thing traders are looking out for is what OPEC+ decides to do at their next output policy meeting.”

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The group and its allies will decide in early March on whether to extend output cuts into the second quarter. The curbs got off to a slow start in January, with data compiled by OPEC showing that Iraq, the group’s second-largest producer, pumped more than its quota. The nation will improve its compliance after completing a review of external estimates of its production, Oil Minister Hayyan Abdul Ghani said in an interview in Cairo on Monday.

Meanwhile, tensions in the Red Sea continue to simmer, with the crew of a ship abandoning the vessel after the attack on Sunday evening, the first such evacuation since the Yemen-based group started targeting ships late last year. 

Prices:

  • WTI for March delivery, which expires Tuesday, dropped 1.3 per cent from Friday’s close to settle at $78.18 a barrel in New York.
  • There was no settlement on Monday due to the U.S. holiday.
  • The more-active April contract fell 1.8 per cent to settle at US$77.04 a barrel.
  • Brent for April settlement slid 1.5 per cent to $82.34 a barrel.