Profit-Taking Causes Oil Prices To Dip As Concern Shifts To Supply Tightness

by Ship & Bunker News Team
Wednesday March 29, 2023

After two straight days of gains, oil prices dipped minimally on Wednesday in an act of investor profit-taking – while supply tightness concerns were exacerbated by unexpected stock draws in the U.S.

Brent settled down 37 cents at $78.28 per barrel, and West Texas Intermediate settled down 23 cents to $72.97, causing Dennis Kissler, senior vice president of trading at BOK Financial, to remark, "The markets are trying to find equilibrium."

The Energy Information Administration reported unexpected draws in U.S. crude stockpiles as well as gasoline stocks; the former was attributed to refineries ramping up operations after maintenance season, and the latter indicated strong demand heading into summer.

The flip side of this bullish news was that it came on the heels of a 450,000 barrels per day (bpd) crude export halt from Iraq due to an arbitration decision regarding transport through a pipeline running from the semi-autonomous Kurdistan region's northern Kirkuk oil fields to the  port of Ceyhan in Turkey.

The pipeline stoppage is expected to continue until Ankara, Baghdad, and the KRG find a settlement to resume exports.

Also, Norwegian oil firm DNO said it had begun shutting down production at its fields in Kurdistan.

John Kilduff, founding partner at Again Capital, noted that, "the broader story is much more challenged right now."

Concern of another kind was evident on Wednesday, revealed by a new Federal Reserve Bank of Dallas survey showing that U.S. oil and gas activity stalled in the first quarter amid rising costs and weaker prices for oil and gas.

Additionally, the bank's activity index, which measures conditions among oil and gas firms across Texas, New Mexico, and Louisiana, decreased to 2.1 from 30.3 in the fourth quarter of 2022.

One survey respondent said, "An estimated 30–40 percent cost increase in field operations, increased interest charges on borrowed money, a drastic collapse in natural gas prices combined with lower crude oil prices, produced a noticeable lower cash flow."