By Adedapo Adesanya
Crude oil prices dropped on Thursday while the market was eyeing the United States Federal Reserve’s speech for clues about future interest rate hikes.
Brent crude settled at $99.34 a barrel after it shed $1.88 or 1.9 per cent while the US West Texas Intermediate crude settled at $92.52 a barrel after losing $2.37 or 2.5 per cent.
The downward trend is just the latest swing on Thursday as the market attempts to understand the impact that a rate hike will have on crude oil demand.
The US Federal Reserve Chairman, Mr Jerome Powell, is set to speak on Friday at an annual economic policy symposium.
Mr Powell is expected to summarize where the Fed stands in its fight to control inflation, including information about its rate-path hike in the long and short-term.
The market swung bearish on the possibility compared to the impact that an output cut from the Organisation of the Petroleum Exporting Countries and allies (OPEC+) would have on supply.
Earlier this week, OPEC+ sources said that the group could respond to what the Saudi oil minister said was a disconnect between the physical crude oil market and the paper one.
Other OPEC+ sources confirmed that OPEC+ could consider making production cuts at the next meeting, although the topic has not been formally added to the agenda.
Further dragging down the price of crude oil is the possibility that Iran and the United States could agree on the terms of a new nuclear deal.
Talks between the European Union (EU), the United States, and Iran to revive the 2015 nuclear deal are continuing, with Iran saying it had received a response from the United States to the EU’s “final” text to resurrect the agreement.
A new nuclear deal would free Iran’s oil industry from US sanctions and would increase the amount of crude oil that the country is able to export and this could be up to 4 million barrels per day.
Should Iran and the US reach a deal, analysts say OPEC+ would be even more motivated to cut production.
As OPEC+ has hinted to cut production, it is questionable whether that means cutting production targets, which it is undershooting by more than 2 million barrels per day production volumes.
Dipo Olowookere