October 03, 2023 (MLN): Oil prices dropped on Tuesday, extending losses for the fourth straight session as the dollar continues to strengthen amid rising bond yields.
Brent crude is currently trading at $89.41 per barrel, down by 0.72% on the day.
While West Texas Intermediate crude (WTI) is trading at $87.15 per barrel, down by 0.66% on the day.
To note, Brent Crude and WTI, surged by 5.93% and 7.96% MoM, reaching $91.72 and $89.80, respectively in September.
Brent Crude, the major oil benchmark, is expected to drop to $70 a barrel by 2024 as the global market is expected to swing to surplus by next year, according to Citigroup's latest predictions.
"While supply remains tight, higher interest rates mean expensive storage of inventories. This could lead to further destocking of oil inventories while increasing spot availability," as Reuters reported.
Earlier on Monday, the U.S. dollar index (DXY) rose to a 10-month high against a basket of major peers after the U.S. government avoided a partial shutdown and economic data fueled expectations the Federal Reserve will keep rates higher for longer, which could slow economic growth.
Higher interest rates along with a stronger dollar also make oil more expensive for holders of other currencies, which could dent oil demand.
The announcement from Turkey's energy minister that the country will restart operations this week on a pipeline from Iraq that has been suspended for about six months further weighed on prices.
"In theory, under the terms of the OPEC+ deal, production (outside the GCC) should remain flat over Q4. However, Iraq’s compliance has been somewhat spotty in the past and export levels should be expected to rise, assuming the pipeline resumes operations as planned," analysts from BMI Research said in a client report.
