#Oil Loses $6 Per Barrel On Demand Fears,Iraq Exports (4 Sep 2022)
Summary
- ECB should consider 75 bps rate rise for Sept. – Estonian policymaker
- Iraq’s SOMO says oil exports unaffected by unrest
- Russia’s Gazprom Neft aims to double oil output at Zhagrin
- OPEC+ meeting on Sept. 5, Saudi Arabia warns of possible output cuts
- S. gasoline prices close at lowest since before Ukraine war
Oil prices dropped nearly $6 per barrel on August 30, the sharpest fall in almost a month, on fears that fuel demand could shrink as global central banks lift rates to combat soaring inflation, and as unrest in Iraq failed to weaken the OPEC nation’s crude exports.
Brent crude futures for October came down 5.5%, or $5.78, at $99.31 per barrel after reaching a session low of $97.55 per barrel. The October contract ends on Wednesday and the more active November contract was at $97.84, a fall of 4.9%. U.S. West Texas Intermediate crude fell by 5.5%, or $5.37, to $91.64.
With inflation approaching double-digit territory in most major economies, central banks could turn to more aggressive interest rate hikes, dampening economic growth and fuel demand. The European Central bank should include a 75-basis-point interest rate rise among its options for next month’s policy meeting, Estonian policymaker Madis Muller said on Tuesday.
German inflation in August jumped to its highest in close to 50 years, data showed. Hungary’s central bank lifted its base rate (HUINT=ECI) by 100 basis points to 11.75%. Bets on an additional huge Fed rate hike also strengthened the dollar. A stronger greenback makes dollar-denominated oil more costly for buyers using other currencies.
Prices dropped after comments from Iraq’s state-owned marketer SOMO that the country’s oil exports had been untouched by unrest, said UBS analyst Giovanni Staunovo. Baghdad’s severe clashes in years between rival Shi’ite Muslim groups went on for a second day before dying out when powerful cleric Moqtada al-Sadr instructed his supporters to go home.
SOMO said it could deliver more oil to Europe if needed.
Prices felt more heat when Russia’s ever-growing oil producer, Gazprom Neft (http://SIBN.MM), said it intends to double oil output at its Zhagrin field in Western Siberia to higher than 110,000 barrels a day.
Investors will follow the meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known jointly as OPEC+, on September 5.
Saudi Arabia last week mentioned the possibility of production cuts from OPEC+, which sources said could collide with an increase in supply from Iran should it strike a nuclear deal with the West.
In another likely supply boost, Venezuela’s oil minister said the country was prepared to forge ahead with business with the oil major Chevron Corp (CVX.N), adding that progress to restart the operations will be determined by licenses from Washington.
With many producers already operating at or above capacity and mounting signs that the global economy may be slowing, some cut of supply seems more possible in coming months, said Matt Weller, head of research at City Index .
U.S. crude stockpiles jumped, while fuel stocks dropped in the latest week, according to market sources referring to American Petroleum Institute figures on Tuesday.
Crude stocks jumped by almost 593,000 barrels for the week ended August 26, based on the data. U.S. crude oil stockpiles are anticipated to have tumbled in the week to August 26, a preliminary Reuters’ survey showed on Monday.
The Energy Information Administration, the statistical arm of the U.S. Department of Energy, will announce its own figures at 10:30 a.m. (1430 GMT) on Wednesday. U.S. gasoline futures came at $2.6944 a gallon on Tuesday, its lowest close since Feb 18, before Russia invaded Ukraine.
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