(Bloomberg) — Oil was dragged lower by a selloff throughout global financial markets as Saudi Arabia reaffirmed it will continue output cuts until the end of the year.
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West Texas Intermediate fell below $89 a barrel. OPEC+’s Joint Ministerial Monitoring Committee convenes online later Wednesday, but Saudi Arabia and Russia announced plans to continue additional curbs until December.
In the US, meanwhile, the government will release figures on crude inventories against a backdrop of fast-declining holdings, including at the storage hub at Cushing, Oklahoma. Estimates from the industry-funded American Petroleum Institute released Tuesday showed a modest increase at the site last week, but a draw on a nationwide basis, according to people familiar with the figures. A key US pipeline has also seen lower flows this week.
Oil has rallied since mid-June as the alliance’s supply cuts tightened the market, with inventories sinking and key timespreads indicating greater competition for prompt barrels. Still, the upsurge has run into resistance in recent sessions as investors fret the Federal Reserve may not be done raising interest rates, with a rise in the dollar making commodities more expensive for most buyers. Major gains in US Treasury yields have also hurt raw materials.
“The US dollar index is at year-to-date highs, and judging by the actions and comments of the central banks and their pilgrimage to tame inflation, the world’s marker currency is bedding in a rally that will continue to haunt all markets, including oil,” said John Evans, an analyst at brokerage PVM in London.
A potential tweak to Russia’s ban on diesel shipments was also in focus. Moscow is discussing changes to the curb on overseas supplies that would allow exports only from companies that produce the fuel, but keep the restriction in place for non-producers, according to people with knowledge of the matter.
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