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Stronger US dollar weighs on oil prices

Global oil prices settled lower Friday for a third day in a row as the US dollar rose to the highest level in more than a month in the wake of the move by the Fed to pencil in three possible rate cuts this year, dovish remarks from the Bank of England and the surprise rate cut from the Swiss National Bank.

The firmer dollar capped oil, gold and other commodity prices as the ICE dollar index pushed to a month high following the Federal Reserve’s decision this week to keep interest rates at a 23-year high while forecasting 75 basis points of cuts this year. The index was last seen up 1.01 points to 104.45.

WTI crude for May delivery closed down 44 cents to settle at $US80.63 per barrel, while May Brent crude, the global benchmark, closed down 35 cents to $US85.43.

That left both oil contracts down a fraction – less than half a per cent – for the week. “Crude oil prices are under some pressure due to the strong dollar, but Brent Crude remains above $85/brl as rate outlook and supply tightness concerns continued to underpin prices,” Saxo Bank noted.

Still, supply remains tight on 2.2-million barrels per day of voluntary production cuts from OPEC+ members that are scheduled to expire at the end of June, though they could be extended through year end, as they were several times last year.

OPEC+ said its crude production cuts will be “returned gradually subject to market conditions” after the second quarter but no one believes that – the cap has been in place for a year- officially or unofficially.

But it is hurting OPEC members and the group’s February crude production rose +110,000 barrels a day (bpd) to 26.680 million bpd, bearish news for oil prices as Iraq and UAE continue to pump above their production quotas.

US oil rig numbers eased by just one last week. Baker Hughes reported Friday that active US oil rigs in the week ended March 22 fell to 509 rigs, moderately above the 2-year low of 494 rigs posted on November 10. The rise of 15 has come mostly in the last month.

US oil rig numbers have fallen over the past year from the 3-3/4 year high of 627 rigs posted in December 2022.

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And China’s Cnooc is determined to keep Chevron at bay in the latter’s attempts to buy Hess Corporation for $US53 billion.

The Chinese oil giant has filed an arbitration claim against Hess, following Exxon Mobil in trying to establish a right over the company’s stake in the Stabroek oilfield in Guyana.

“We have a joint operating agreement with partners regarding the Stabroek block. We will deal with relevant issues based on the relevant arbitration terms,” Cnooc Board Secretary Xu Yugao reportedly said during an earnings briefing late Thursday, according to Reuters.

Cnooc filed for arbitration on March 15, the report said.

Exxon and Cnooc are looking to establish a right of first refusal over Hess’ 30% stake in the oil block after Chevron (CVX) announced its $US53 billion bid in October for Hess.

Hess’ ownership in Stabroek is a key focus of Chevron’s purchase of the company, and the oil producer previously warned the merger could collapse if no resolution is reached between the parties.

Exxon is the operator of and has a 45% stake in the Stabroek Block while Cnooc owns 25% of the oilfield.

Chevron has said that both Chevron and Hess believed that the right of first refusal provision did not apply to their transaction.

Exxon and Cnooc obviously believe it is there. Exxon announced last week that it Cnooc and Hess had made another major oil discovery in the Stabroek block with associated gas (the first time gas has been associated in the 16 discoveries in the block so far.