Oil eases 1% on profit taking, interest rate worries after Brent sizzles to $97/bbl; $100 back in focus?

  • With Brent near $100 a barrel, more traders are worried that high oil prices will encourage central bankers to persist with high interest rates to curb sticky inflation.

Edited By Nikita Prasad
Published28 Sep 2023, 10:40 PM IST
Brent futures for November delivery fell 43 cents, or 0.5 per cent, to $96.12 a barrel. REUTERS/Alexander Manzyuk/File Photo
Brent futures for November delivery fell 43 cents, or 0.5 per cent, to $96.12 a barrel. REUTERS/Alexander Manzyuk/File Photo(REUTERS)

Oil futures eased about 1 per cent in late trade hours on Thursday, September 28 as traders took profits after prices soared early to one-year highs and investors worried that high interest rates may weigh on western economies and oil demand.

On its second to last day as the front-month, Brent futures for November delivery fell 43 cents, or 0.5 per cent, to $96.12 a barrel. Brent futures for December, which will soon be the new front-month, were down 0.3 per cent to $94.07 per barrel. US West Texas Intermediate (WTI) crude fell 77 cents, or 0.8 per cent, to $92.91 per barrel, according to news agency Reuters.

The Brent front-month rose early to its highest since November 2022 and WTI to its highest since August 2022 on scarce supply and inventory declines. However, with Brent near $100 a barrel, more traders are worried that high oil prices will encourage central bankers to persist with high interest rates to curb sticky inflation.

The premium of Brent over WTI held near a five-month low after narrowing to $2.87 per barrel on Wednesday, its lowest since late April. The premium of the WTI front-month over the second month held near a 14-month high for a second day. On Wednesday, that premium soared to $2.38 a barrel, the highest since the end of July 2022, according to Reuters.

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a October 19 expiry, were last trading 1.46 per cent higher at 7,678 per bbl, having swung between 7,672 and 7,884 per bbl during the session so far, against a previous close of 7,792 per barrel.

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Oil on the boil: Is Brent at $100/bbl back in focus?

-Brent surged to almost $98/barrel-mark in today's session before retreating to $96, down 1 per cent as after US government data showed that US crude stocks fell by 2.2 million barrels last week to 416.3 million barrels - which added to supply concerns.

-Crude stocks at the Cushing, Oklahoma, storage hub - delivery point for US crude futures, fell to the lowest since July 2022, data showed. Stockpiles at Cushing have been falling to near historic lows due to strong refining and export demand, prompting concerns about quality of the remaining oil.

-The US economy maintained a fairly decent 2.1 per cent pace of growth in the second quarter and appears to have gathered momentum this quarter with a resilient labor market driving robust wage gains.

Also Read: The ‘Crude’ Question: Despite restricted supply, can oil sustain at $100/bbl?

-Growth estimates for the July-September quarter are currently at 4.9 per cent rate. But the fourth quarter could see a sharp slowdown if there is a US government shutdown due to infighting among Republicans in the House of Representatives, according to reports.

-US Federal Reserve officials are focused on the super core price measure after hiking the benchmark overnight interest rate by 525 basis points since March 2022 to the 5.25 per cent-5.50 per cent range.

-"Cushing storage has shrunk to a historically low level, leading to a further increase in backwardation in the WTI curve," analysts at Barclays, a bank, said in a note. Backwardation is where current or spot prices are higher than future prices, giving energy firms little incentive to pay to store fuel for future months.

-"In the absence of a demand shock, it might take a sustained further narrowing of the WTI-Brent spread for a material turnaround in storage level at Cushing to occur," said Barclays.

-US crude draws follow combined cuts of 1.3 million barrels a day to the end of the year by Saudi Arabia and Russia, part of the Organisation of Petroleum Exporting Countries and its allies, or OPEC+.

-Russia said its ban on fuel exports will remain in place until the domestic market stabilizes and noted it has not discussed with OPEC a possible supply increase to compensate for that fuel export ban.

 

 

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First Published:28 Sep 2023, 10:40 PM IST
Business NewsMarketsCommoditiesOil eases 1% on profit taking, interest rate worries after Brent sizzles to $97/bbl; $100 back in focus?

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