Oil shoots over 3% as US crude stock adds to supply concerns, Brent over $96/bbl

Brent crude futures breached $97 a barrel, and was trading up $2.55 to $96.51 a barrel. US West Texas Intermediate crude futures (WTI) climbed $3.16 to $93.54. Both benchmarks touched their highest in intraday trading for this year, according to news agency Reuters.

The lack of spare supply was reflected at the front end of the pricing curve, he said, as the premium for barrels for near-term delivery of WTI has reached almost $2 a barrel compared with those for next month. WTI’s discount to Brent also hit its narrowest since late April.

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a October 19 expiry, were last trading 3.49 per cent higher at ₹7,801 per bbl, having swung between ₹7,568 and ₹7,822 per bbl during the session so far, against a previous close of ₹7,543 per barrel.

‘’Diesel shipments from Russia have slowed in recent days, as the nation temporarily banned fuel exports…Oil prices might remain buoyed for the day as Chinese industrial profits rose at the fastest pace in at least more than a year in August at 17.2 per cent year-on-year,” said Ravindra Rao, CMT, EPAT, VP – Head Commodity Research, Kotak Securities Ltd.

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What’s boiling crude oil prices?

-US crude stocks fell by 2.2 million barrels last week to 416.3 million barrels, according to US government data. Crude stocks at the key Cushing, Oklahoma, storage hub and the delivery point for US crude futures, fell by 943,000 barrels in the week to just under 22 million barrels, the lowest since July 2022, according to Reuters.

-Stockpiles at Cushing have been falling closer to historic low levels due to strong refining and export demand, prompting concerns about the quality of the remaining oil at the hub and the potential to fall below minimum operating levels, according to the report.

-The drawdown in US crude stocks come as Saudi Arabia and Russia – as part of the OPEC+ extended voluntary production cuts of 1.3 million barrels per day to the end of the year, raising supply concerns in oil markets till the end of the year.

-Also adding to the supply tightness was Russia – which imposed a temporary ban on gasoline and diesel exports last week – to most countries to stabilise the domestic market, though it later eased restrictions. Russian President Vladimir Putin ordered his government to make sure retail fuel prices stabilise after a jump caused by an increase in exports. 

-The impact of the tight global supplies could be mitigated if interest rates curb demand. In another hawkish signal in the US, Minneapolis Federal Reserve Bank President Neel Kashkari said it was not clear whether the central bank has finished raising rates. Higher interest rates increase borrowing costs, which could slow economic growth and reduce oil demand.

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Updated: 27 Sep 2023, 10:13 PM IST