Despite tight global supply, traders hang in the balance over the Federal Reserve’s moves, which will affect the US’s economic landing and fuel demand
20 September 2023 - 07:57
by Agency Staff
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Tokyo — Oil prices retreated further from 10-month highs on Wednesday ahead of the US Federal Reserve’s rate decision, with investors uncertain when peak rates will be hit and how much of an impact it will have on energy demand.
Prices fell despite a bigger-than-expected draw in US oil stockpiles and weak US shale output that indicated tight crude supply for the rest of 2023.
Global benchmark Brent crude futures fell slightly over $1 to $93.33 a barrel, and were last down 80c, or 0.8%, at $93.54 a barrel by 3.10am GMT. Brent hit $95.96 on Tuesday, its highest since November.
US West Texas Intermediate (WTI) crude futures shed 0.8%, or 75c, to $90.45 a barrel, after climbing to a 10-month high of $93.74 a barrel the previous day. The October WTI contract expires on Wednesday and the more active November contract was down 70c, or 0.8%, to $89.78 a barrel.
“The oil rally is taking a little break as every trader awaits a pivotal Fed decision that might tilt the scales of whether the US economy has a soft or hard landing,” said Edward Moya, senior market analyst at data and analytics firm Oanda.
Moya added that the oil market is still “very tight” and will remain so over the short-term.
“Unless Wall Street grows nervous, the Fed will kill the economy, the crude demand outlook should [only] gradually soften, but the oil market will easily have a supply deficit throughout winter.”
Investors eye Fed rate decision
Investors are awaiting a raft of central bank rate decisions this week, including one by the US Federal Reserve on Wednesday, to assess the outlook for economic growth and fuel demand. The Fed is widely expected to keep interest rates on hold, but the focus will be on its policy path, which is unclear.
The oil rally is taking a little break as every trader awaits a pivotal Fed decision that might tilt the scales of whether the US economy has a soft or hard landing
Edward Moya, senior market analyst, Oanda
US crude oil stockpiles fell last week by about 5.25-million barrels, according to market sources citing American Petroleum Institute (API) figures on Tuesday. Analysts in a Reuters poll had expected a 2.2-million-barrel decline.
“A large drop in US oil inventories and slow US shale output have added to supply concerns coming from extended production curbs by Saudi Arabia and Russia,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
“There will be some short-term adjustments in oil prices, because of the recent spike, but expectations of reaching $100 a barrel on both Brent and WTI later this year will remain unchanged,” he said.
Additionally, Russia’s government is considering imposing export duties on all types of oil products of $250 per metric tonne — much higher than current fees — from October 1 until June 2024 to tackle fuel shortages, sources told Reuters on Tuesday.
That move comes as US oil output from top shale-producing regions is on track to fall to 9.393-million barrels per day (bpd) in October, the lowest since May 2023, and after Saudi Arabia and Russia extended combined supply cuts of 1.3-million bpd to the end of the year.
On the demand side, India’s crude oil imports fell for a third month in a row in August, government data showed on Tuesday, as refiners in the world’s third-biggest importer carried out maintenance and reduced shipments from Russia.
On supply, ExxonMobil has pledged additional oil production of nearly 40,000 bpd in Nigeria in a new investment push in the country, a presidential spokesperson said on Tuesday, citing Exxon’s president of global upstream operations.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil falls ahead of Fed rate decision
Despite tight global supply, traders hang in the balance over the Federal Reserve’s moves, which will affect the US’s economic landing and fuel demand
Tokyo — Oil prices retreated further from 10-month highs on Wednesday ahead of the US Federal Reserve’s rate decision, with investors uncertain when peak rates will be hit and how much of an impact it will have on energy demand.
Prices fell despite a bigger-than-expected draw in US oil stockpiles and weak US shale output that indicated tight crude supply for the rest of 2023.
Global benchmark Brent crude futures fell slightly over $1 to $93.33 a barrel, and were last down 80c, or 0.8%, at $93.54 a barrel by 3.10am GMT. Brent hit $95.96 on Tuesday, its highest since November.
US West Texas Intermediate (WTI) crude futures shed 0.8%, or 75c, to $90.45 a barrel, after climbing to a 10-month high of $93.74 a barrel the previous day. The October WTI contract expires on Wednesday and the more active November contract was down 70c, or 0.8%, to $89.78 a barrel.
“The oil rally is taking a little break as every trader awaits a pivotal Fed decision that might tilt the scales of whether the US economy has a soft or hard landing,” said Edward Moya, senior market analyst at data and analytics firm Oanda.
Moya added that the oil market is still “very tight” and will remain so over the short-term.
“Unless Wall Street grows nervous, the Fed will kill the economy, the crude demand outlook should [only] gradually soften, but the oil market will easily have a supply deficit throughout winter.”
Investors eye Fed rate decision
Investors are awaiting a raft of central bank rate decisions this week, including one by the US Federal Reserve on Wednesday, to assess the outlook for economic growth and fuel demand. The Fed is widely expected to keep interest rates on hold, but the focus will be on its policy path, which is unclear.
US crude oil stockpiles fell last week by about 5.25-million barrels, according to market sources citing American Petroleum Institute (API) figures on Tuesday. Analysts in a Reuters poll had expected a 2.2-million-barrel decline.
“A large drop in US oil inventories and slow US shale output have added to supply concerns coming from extended production curbs by Saudi Arabia and Russia,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
“There will be some short-term adjustments in oil prices, because of the recent spike, but expectations of reaching $100 a barrel on both Brent and WTI later this year will remain unchanged,” he said.
Additionally, Russia’s government is considering imposing export duties on all types of oil products of $250 per metric tonne — much higher than current fees — from October 1 until June 2024 to tackle fuel shortages, sources told Reuters on Tuesday.
That move comes as US oil output from top shale-producing regions is on track to fall to 9.393-million barrels per day (bpd) in October, the lowest since May 2023, and after Saudi Arabia and Russia extended combined supply cuts of 1.3-million bpd to the end of the year.
On the demand side, India’s crude oil imports fell for a third month in a row in August, government data showed on Tuesday, as refiners in the world’s third-biggest importer carried out maintenance and reduced shipments from Russia.
On supply, ExxonMobil has pledged additional oil production of nearly 40,000 bpd in Nigeria in a new investment push in the country, a presidential spokesperson said on Tuesday, citing Exxon’s president of global upstream operations.
Reuters
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