Oil Falls as Saudi Supply Outlook Improves

by Bloomberg | C. Gorrivan, K. Matsuyama, M. Gindis
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

Crude futures fell as Saudi and Libyan supply disruptions showed signs of easing.

Oil retreated on indications that some of the recent supply outages in the Middle East are beginning to resolve and traders adjust positions after a blistering rally over recent sessions.

Brent slipped to settle near $106 a barrel, and West Texas Intermediate fell more than 3%, as Saudi Arabia seeks to return about half the capacity of its East-West pipeline within days after shutting the conduit last week because of drone strikes. Riyadh is also ramping up sales of crude from outside the Strait of Hormuz following the disruption. Libya, meanwhile, restored output to normal after outages at oil fields this week.

Oil had jumped 4% over the previous two sessions on fears of fresh supply disruptions stemming from the Iran war, including questions about a prolonged closure of Saudi Arabia’s cross-country pipeline that has served as a lifeline to circumnavigate the severely disrupted Hormuz. Brent’s 14-day relative strength index rose to overbrought territory above 70, a level that can signal a correction is imminent.

Oil has surged almost 80% this year following the outbreak of the US-Iran war and as the Russia-Ukraine conflict drags on. The jump, along with even steeper rises in fuel costs, have contributed to concerns over global inflation. The Federal Reserve joined some of its central bank peers in tightening policy, voting on Wednesday to hike interest rates by a quarter point to try and address price pressures.

Oil’s price dip should be seen “as a breather rather than a clear reversal for now,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore, cautioning that risks remained severe. Any further escalation or prolonged outages could quickly put upward pressure back on prices, she added.

As a result of the interruption of the East-West pipeline, Saudi Aramco has been delaying oil deliveries to some European customers, sparking a scramble for alternative barrels.

Traders are also tracking turmoil in Yemen, where Houthi militants have been advancing against local rivals, while escalating attacks on targets in Saudi Arabia and its shipping routes. The group has pushed toward the Bab el-Mandeb Strait, the chokepoint at the southern end of the Red Sea.

The price of Middle Eastern crude loading outside the Persian Gulf rose to the highest since March on growing concerns that supply shortages may be returning to the critical levels seen in the early days of the conflict. Oman crude futures advanced to more than $130 a barrel.

The diesel market has been particularly tight, with supplies hit both by the conflict in the Middle East and Ukrainian attacks on Russian refineries. US diesel futures settled at a record on Tuesday, and average retail pump prices are also at an all-time high. Senate Majority Leader John Thune said that he was “open to exploring” an export ban, while a top energy official in the Trump administration said such a move wouldn’t bring down prices.

Oil Prices

• Brent for November settlement fell 2.7% to settle at $105.83 a barrel.
• WTI for October delivery shed 3.2% to settle at $102.43 a barrel.

• Freight has also soared given the dislocations in global shipping, with flows through the Strait of Hormuz still below pre-war levels and refiners seeking cargoes from more-distant suppliers. The cost of shipping US crude to Asia hit a record, with a very large crude carrier from the US Gulf to China costing $44.8 million. That’s up from $39 million a day earlier.
• Elsewhere, US data offered a counterweight to the midweek slide. Crude inventories fell 640,000 barrels, compared to a large build forecast by a widely followed industry report. Nationwide diesel stockpiles rose 1.6 million barrels but remain at their lowest seasonal level since at least 2000, while gasoline inventories also ticked higher. West Coast refinery utilization, meanwhile, climbed to its highest seasonal level since 2018, as California contends with some of the highest fuel prices in the country.

by Bloomberg | C. Gorrivan, K. Matsuyama, M. Gindis
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas