Crude oil recorded the biggest decline in three weeks: the resumption of production in Iraq's oil fields suppresses geographical premiums, and the expectation that the Fed will cut interest rates is difficult to withstand supply pressure

The Zhitong Finance App learned that crude oil futures prices recorded the biggest drop in nearly three weeks on Monday, mainly due to the resumption of production in an oil field in Iraq, which accounts for 0.5% of global oil supply, and a peace agreement aimed at ending the war in Ukraine still seems out of reach. Market observers say continued attacks on Russia's energy infrastructure are driving up risk premiums.

Iraqi energy officials said that the country's 460,000 barrels of oil field has now resumed production after a leak in an export pipeline caused production cuts.

Peace negotiations in Ukraine are still progressing slowly, and despite US President Trump's pressure to reach an agreement, disputes over Ukraine's security and the land occupied by Russia remain unresolved.

“The bearish balance between global oil supply and demand is still slowly turning into a more obvious sign, particularly within the US,” Ritterbusch analysts said in a report. “This week's deal will be affected not only by headlines about Ukraine, Russia, and Venezuela, leading to geo-risk fluctuations, but will also be disrupted by the Federal Reserve's interest rate decision, which will have an impact on demand for petroleum products.”

The market expects an 86% chance that the Fed will cut interest rates by 25 basis points; a lower interest rate environment generally supports economic activity and demand for commodities.

Both benchmark crude oil contracts closed at their highest levels since November 18 at the end of trading on Friday, and both ended up falling about 2% this Monday. Recent monthly WTI crude oil futures for January delivery on the New York Mercantile Exchange closed at $58.88 per barrel, while recent Brent crude futures for February delivery closed at $62.49 per barrel, all of which recorded the biggest decline in dollars and percent since November 19.

US gas futures retreated from a high level driven by weather factors in the previous week. The New York Mercantile Exchange's recent contract for January delivery closed down 7.1% to $4.912 per million British thermal units, the biggest one-day percentage drop since June 30.

Related ETFs: American Petroleum Fund (USO.US), Brent Crude Oil Fund (BNO.US), ProShares Double Short Bloomberg Crude Oil ETF (UCO.US), ProShares Double Short Bloomberg Crude Oil ETF (SCO.US), US December Petroleum Fund (USL.US), Direxion Daily S&P Oil and Gas Export and Production 2x Longer ETF (DRIP.US), Direxion Daily S&P Oil and Gas Exploration and Production 2x Longer ETF (GUSH.US), etc.