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Crude Oil

Oil Prices Rally for Third Consecutive Day Amidst Supply Deficit Forecasts

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Oil prices continued their upward trajectory for a third consecutive session of gains on Monday.

The surge was driven by a series of factors, including predictions of an expanding supply deficit in the fourth quarter.

The extension of production cuts by oil giants Saudi Arabia and Russia, along with growing optimism regarding increased demand in China, played significant roles in boosting the market sentiment.

In the early hours of trading, Brent crude oil, against which Nigerian oil is priced, surged by 71 cents, or 0.8% to $94.64 per barrel while the U.S. West Texas Intermediate crude oil climbed to $91.55 per barrel, up by 78 cents or 0.9%.

Tina Teng, an analyst at CMC Markets, commented on the bullish factors driving the oil market’s upward momentum, she said, “China’s stimulus policy, resilient U.S. economic data, and OPEC+’s ongoing output cuts are the bullish factors that support the oil market’s upside movement.”

Teng also pointed to China’s central bank’s recent reserve ratio cut, designed to enhance liquidity and support its economy, as a contributing factor.

As the week unfolds, market participants will closely monitor decisions and commentary from central banks, including the U.S. Federal Reserve, regarding interest rate policies. Also, attention will be directed towards key economic data releases from China.

Brent and West Texas Intermediate (WTI) crude prices have notched up gains for three consecutive weeks, reaching their highest levels since November. These impressive climbs put them on course for their most substantial quarterly increase since the first quarter of 2022, coinciding with Russia’s invasion of Ukraine.

ANZ analysts highlighted the potential consequences of the Saudi and Russian output cuts. These cuts, if maintained, could lead to a deficit of up to 2 million barrels per day (bpd) in the fourth quarter. Such a scenario could result in further drawdowns in inventories, leaving the market susceptible to additional price spikes in 2024.

Saudi Arabia and Russia have chosen to extend their supply cuts until the end of the year as part of the OPEC+ group’s coordinated strategy. Concurrently, Chinese refineries have increased production levels, driven by robust export margins.

Edward Moya, an analyst at OANDA, speculated about the future trajectory of oil prices, stating, “It seems like prices will easily find a home above the $90 a barrel level, which means the focus might shift to the demand outlook from the world’s two largest economies.”

ANZ predicts that global oil demand growth is poised to reach 2.1 million bpd, aligning with forecasts from the International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC).

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Tumble Amidst Central Bank’s Tightened Grip on Interest Rates and Economic Uncertainty

Supply Constraints and Economic Fears Cast Shadows Over the Oil Market

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Oil prices took a tumble on Tuesday as concerns mounted that fuel demand would take a hit due to major central banks standing firm on their decision to keep interest rates high, despite a backdrop of tightening oil supply.

Brent crude oil, against which Nigerian oil is priced, dipped by 87 cents to $92.42 a barrel at 07:30 a.m. Nigerian time while the U.S. West Texas Intermediate crude sheds 87 cents to $88.81.

The prevailing sentiment among analysts was that “Fears of an economic recession may again dominate the oil market’s movement due to surging U.S. bond yields following the Fed’s hawkish stance last week,” stated Tina Teng, a market analyst at CMC Markets in Auckland.

The world’s leading economic authorities, the U.S. Federal Reserve and the European Central Bank, have recently reaffirmed their commitment to combat inflation, signaling that tight monetary policy could persist longer than initially anticipated.

The higher interest rates associated with these policies typically stifle economic growth, in turn dampening oil demand.

Adding to the economic unease, rating agency Moody’s sounded the alarm on Monday, warning that a U.S. government shutdown would negatively impact the nation’s credit. This caution comes just a month after Fitch downgraded the U.S. by one notch amid concerns related to the debt ceiling crisis.

Furthermore, China’s ongoing property market troubles have cast a shadow on market sentiment. Tina Teng from CMC Markets noted that China Evergrande’s announcement of missing a bond coupon payment on Monday evening rekindled investor pessimism regarding the sector, which had long been a cornerstone of economic growth.

While supply constraints persist with Russia and Saudi Arabia extending production cuts until the end of the year, Moscow chose to ease its temporary ban on gasoline and diesel exports on Monday to stabilize its domestic market.

Looking ahead, China’s Golden Week holiday, beginning this Sunday, could provide some relief for oil prices. A potential surge in travel during the holiday period is expected to drive increased oil product demand from the world’s second-largest oil consumer.

Despite the turbulence, oil prices have surged by approximately 30% since mid-year primarily due to tightening supply conditions. This price increase, however, has come at a cost, with JP Morgan estimating that it has shaved off 0.5 percentage points from global GDP growth in the second half of the year.

Nevertheless, JP Morgan analysts reassure that this shock “is not large enough to threaten the expansion by itself.”

Baden Moore, Head of Carbon and Commodity Strategy at National Australia Bank, added his perspective, stating, “We forecast $94/bbl through the 4Q23 period, which is the maximum steepness of the curve we see before OPEC likely eases its supply constraints.”

As the oil market navigates these uncertain waters, the world watches closely, mindful of the intricate interplay between central bank policies, economic conditions, and supply dynamics that continue to shape the energy landscape.

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Crude Oil

Oil Markets Brace for Potential Resumption of Rally Amid Tightening Supplies

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Oil markets are maintaining their steady course as hedge funds double down on their bets that tightening supplies will reignite the recent rally, despite a slight pause last week.

West Texas Intermediate (WTI) gained 0.7% before settling just above the $90-per-barrel price level following the surge in hedge funds’ bullish positions on WTI, the highest since February 2022.

Brent crude oil, against which Nigerian crude oil is priced, appreciated by 0.53% to $93.76 per barrel.

JPMorgan Chase & Co. is also chiming in, joining the chorus of voices predicting an “oil supercycle.” Oil has surged by over 25% since the end of June, poised for its most substantial quarterly gain since March 2022. This robust performance is credited to supply restrictions implemented by OPEC+ heavyweights Saudi Arabia and Russia, alongside brighter economic prospects in the US and China.

The market buzz is now dominated by discussions of the elusive $100-a-barrel crude, which could have ripple effects, increasing pressure on importing nations.

Analyst Zhou Mi from the Chaos Research Institute in Shanghai remains optimistic, emphasizing Saudi Arabia’s ongoing output cuts and solid demand from both China and the US.

Meanwhile, the physical market echoes these sentiments. Russia’s recent ban on diesel and gasoline exports has already elevated fuel prices, while US crude stockpiles continue to dwindle. The oil market’s backwardated structure further underscores strong competition for immediate supplies.

China is also gearing up for its Golden Week holiday, which is expected to boost jet fuel demand in the world’s largest oil-importing nation. With over 21 million people anticipated to take to the skies during this extended break, the momentum in the air travel sector appears to be continuing.

Saudi Arabia’s Foreign Minister, Faisal bin Farhan, highlighted the role of OPEC and its allies in stabilizing energy markets, underscoring their commitment to ensuring market equilibrium during a recent United Nations speech.

As the world watches these market dynamics unfold, the future of oil prices remains uncertain but decidedly intriguing.

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Crude Oil

Oil Prices Rally Amidst Russian Export Ban and Rate Hike Concerns

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Oil prices saw an upward trend on Friday as concerns over Russia’s ban on fuel exports potentially tightening global supply.

This development overshadowed apprehensions of further interest rate hikes in the United States that could impact demand.

However, despite this bounce, oil prices were still on course for their first weekly decline in four weeks.

Brent crude oil gained 46 cents, or 0.5% to $93.76 per barrel while the U.S. West Texas Intermediate crude (WTI) oil surged by 65 cents, a 0.7% rise to $90.28 a barrel.

These gains were driven by growing concerns regarding tight global supply as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) continued to implement production cuts.

Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, commented on the volatile nature of the market, stating, “Trading remained choppy amid a tug-of-war between supply fears that were reinforced by a Russian ban on fuel exports and worries over slower demand due to tighter monetary policies in the United States and Europe.”

He further noted that investors would closely monitor OPEC+ production cuts and the impact of rising interest rates, predicting that WTI would trade within a range of approximately $90 to $95.

Russia’s abrupt ban on gasoline and diesel exports to countries outside a select group of four ex-Soviet states had an immediate effect as it aimed to stabilize the domestic fuel market. This export restriction prompted a nearly 5% increase in heating oil futures on Thursday.

Tina Teng, an analyst at CMC Markets, explained, “Crude oil bounced off a session low after Russia banned diesel exports, which included gasoline. The action reversed a downside movement in crude markets following the hawkish Fed decision.”

However, she also warned that mounting concerns about a recession in the Eurozone could continue to exert downward pressure on oil prices.

The U.S. Federal Reserve recently maintained its interest rates but adopted a more hawkish stance, projecting a quarter-percentage-point increase to 5.50%-5.75% by the year-end. This decision heightened fears that higher rates might dampen economic growth and reduce fuel demand.

Also, the stronger U.S. dollar, reaching its highest level since early March, made oil and other commodities more expensive for buyers using alternative currencies.

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