Oil prices rise but post biggest weekly decline since March
In the latest news, oil prices have risen but have also experienced their biggest weekly decline since March. This decline comes after Russia lifted a partial ban on fuel exports, which has further fueled concerns about the demand for oil due to macroeconomic challenges. Despite the rise in oil prices on Friday,
Brent futures recorded a decline of about 11% for the week, while West Texas Intermediate crude futures saw an over 8% drop. Worries about high-interest rates slowing global growth and dampening fuel demand have contributed to these declines, even as Saudi Arabia and Russia continue to implement supply cuts. However, a robust U.S. economy could potentially buoy near-term oil demand.
These mixed factors have left the sentiment around oil prices uncertain.
Oil prices rise but post biggest weekly decline since March
Oil prices rose on Friday but remained posted their steepest weekly losses since March. This was after another partial lifting of Russia’s fuel export ban compounded demand fears due to macroeconomic headwinds.
Concerns about global growth and fuel demand due to high interest rates
Despite the rise in oil prices on Friday, concerns about global growth and fuel demand persist. The worry stems from persistently high-interest rates, which are expected to slow down the global economy. This could have a negative impact on fuel demand, even if supplies are depressed by Saudi Arabia and Russia, who have said they will continue supply cuts to the year-end.
Saudi Arabia and Russia continue supply cuts to year-end
To address the concerns about oversupply in the market, Saudi Arabia and Russia have committed to continue their supply cuts until the end of the year. The hope is that this will help balance the market and support oil prices.
Mixed sentiment for oil prices due to robust U.S. economy and stronger U.S. dollar
The sentiment around oil prices is mixed. On one hand, a robust U.S. economy could buoy sentiment for near-term oil demand. However, on the other hand, the stronger U.S. dollar resulting from the robust economy has increased bets on another interest rate hike in 2023. A strong U.S. dollar is typically negative for oil demand, as it makes the commodity relatively more expensive for holders of other currencies.
Russia lifts ban on most diesel exports
Russia has announced that it is lifting its ban on most diesel exports, but companies are still required to sell at least 50% of their diesel production to the domestic market. This move is expected to ease supply constraints and potentially increase global diesel supply.
U.S. job growth sizzles; wage inflation cooling
In September, U.S. job growth rose by 336,000, exceeding economists’ forecasts of a 170,000 rise. While this is positive news for the overall economy, there are concerns that it could contribute to wage inflation. However, recent data suggests that wage inflation is slowing down, which could alleviate some concerns in the market.
U.S. oil rig count at lowest since Feb 2022 -Baker Hughes
The number of oil rigs in the U.S. has fallen to its lowest level since February 2022. According to Baker Hughes, there are currently 497 oil rigs in operation. This decrease in rig count indicates a potential decrease in future oil supply from the U.S.
Oil prices rise on Friday
On Friday, oil prices rose. Brent futures settled up 51 cents at $84.58 per barrel, while U.S. West Texas Intermediate crude futures settled up 48 cents at $82.79 per barrel. These price increases provide a ray of hope for oil market participants.
Brent posts a decline of about 11% for the week
Despite Friday’s price increase, Brent futures still recorded a decline of about 11% for the week. This decline is the largest weekly drop since March and highlights the concerns surrounding global growth and fuel demand.
WTI records over 8% drop for the week
Similarly, U.S. West Texas Intermediate crude futures recorded an over 8% drop for the week. This decline further emphasizes the challenges faced by the oil market and the need for measures to stabilize prices.
Persistently high interest rates raise concerns about global growth and fuel demand
One of the main concerns impacting oil prices is the persistently high-interest rates. These high rates are expected to slow down global growth and have a negative impact on fuel demand. Market participants are closely monitoring interest rate trends and their potential impact on oil prices.
Saudi Arabia and Russia continue supply cuts to year-end
To address the oversupply in the market, Saudi Arabia and Russia have opted to continue their supply cuts until the end of the year. These supply cuts are intended to balance the market and prevent further downward pressure on prices.
Mixed sentiment for oil prices due to robust U.S. economy and stronger U.S. dollar
The sentiment surrounding oil prices is currently mixed. On one hand, the robust U.S. economy could lead to increased oil demand. However, the stronger U.S. dollar resulting from the robust economy could have a negative impact on demand, as oil becomes relatively more expensive for holders of other currencies.
Russia lifts ban on diesel exports for supplies delivered to ports by pipeline
Russia has announced the lifting of a ban on most diesel exports for supplies delivered to ports by pipeline. This move is expected to ease supply constraints and potentially increase global diesel supply. Market participants will closely monitor the impact of this decision on diesel prices and availability.
Price spread between gasoil and Brent futures falls to the lowest since July
The price spread between gasoil and Brent futures fell to the lowest level since July. This decrease in the price spread indicates a potential convergence between the two benchmarks. Market participants will closely monitor the price spread for any signs of further changes.
Firmer Chinese travel activity provides temporary support to oil prices
Reports of firmer Chinese travel activity have provided temporary support to oil prices. The country’s mid-autumn and National Day holiday travel saw a significant increase, which could translate to higher oil demand. Market participants will closely monitor Chinese travel activity and its impact on oil prices in the coming weeks.
U.S. oil rigs fall to lowest number since February 2022
The number of oil rigs in the U.S. has fallen to its lowest level since February 2022. This decrease in rig count indicates a potential decrease in future oil supply from the U.S. Market participants will closely monitor rig count data for any signs of stabilization or further declines.
Money managers reduce net long U.S. crude futures and options positions
Money managers have reduced their net long U.S. crude futures and options positions. This reduction suggests a cautious sentiment among market participants. The decisions made by money managers will continue to impact oil prices in the coming weeks.
Conclusion
Despite the rise in oil prices on Friday, concerns about global growth and fuel demand persist. The impact of persistently high-interest rates, along with other macroeconomic headwinds, continues to create uncertainty in the market. However, measures such as supply cuts by Saudi Arabia and Russia, as well as positive developments in Chinese travel activity, provide temporary support to oil prices. Market participants will closely monitor these factors and their impact on the oil market in the coming weeks.
