Oil prices remain stable as Russia reverses its ban on diesel exports.
Oil Prices Stable but on Course for Weekly Loss
LONDON—Oil prices were stable on Friday but were on course for a week-on-week loss, as demand fears driven by macroeconomic headwinds were compounded by another partial lifting of Russia’s fuel export ban on Friday.
On Friday, Brent futures were up 15 cents, or 0.18 percent, at $84.22 at 0817 GMT, while U.S. West Texas Intermediate crude futures were up 20 cents, or 0.24 percent, at $82.51.
Russia announced that it had lifted its ban on diesel exports for supplies delivered to ports by pipeline, under the proviso that companies sell at least 50 percent of their diesel production to the domestic market.
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Almost three quarters of Russia’s 35 million tonnes of diesel exports were delivered via pipeline in 2022.
The ban on all gasoline exports remains in place.
Brent and WTI futures were on course for approximately 12 percent and 9 percent week-on-week declines respectively on Friday, driven principally by concerns that higher-for-longer interest rates will slow global growth and hammer fuel demand.
Demand concerns offset announcements by Saudi Arabia and Russia this week confirming that current voluntary supply cuts worth 1.3 million barrels per day (bpd) will be held until the end of the year.
This week saw a steep drop in U.S. Treasury prices to 17-year lows, on concerns the U.S. Federal Reserve will keep rates higher for longer and growing worries about government spending and a ballooning budget deficit in the United States, the world’s top oil consumer.
“Oil prices are stabilizing after a brutal week that saw a relentless bond market selloff trigger global growth worries,” said Edward Moya, an analyst at OANDA.
“The worst week for crude since March is starting to attract buyers given the oil market will still remain tight over the short-term,” Mr. Moya said.
Investors will be looking ahead to the U.S. monthly jobs report on Friday for signs of how strong the economy is.
The European Central Bank (ECB) has not ruled out further interest rate hikes if inflation were to keep rising, ECB board member Isabel Schnabel said in an interview with Croatian paper Jutarnji list.
What macroeconomic conditions are investors closely monitoring and how could they influence oil prices
Oil prices have remained stable on Friday, but they are on track for a weekly loss due to concerns about weakening demand caused by macroeconomic factors. Additionally, another partial lifting of Russia’s fuel export ban on Friday further compounded these worries.
As of 0817 GMT, Brent futures were up by 15 cents, or 0.18 percent, at $84.22, while U.S. West Texas Intermediate crude futures saw an increase of 20 cents, or 0.24 percent, at $82.51.
Russia recently announced that it was lifting its ban on diesel exports for supplies delivered to ports via pipeline. However, in order to be eligible, companies must sell at least 50 percent of their diesel production in the domestic market.
The lifting of the ban is significant as it could potentially lead to increased diesel exports, adding to the global supply glut. This comes at a time when concerns about weakening demand are already weighing on oil prices.
Macroeconomic headwinds, such as ongoing trade tensions between the United States and China, uncertainty over Brexit, and slowdowns in major economies, have raised concerns about global economic growth. This directly impacts oil demand expectations.
Furthermore, the recent surge in COVID-19 cases, particularly in Europe and parts of Asia, has led to renewed fears of stricter lockdown measures. These measures could potentially decrease economic activity and subsequently dampen oil demand.
For the week, Brent futures are set for a decline of around 1 percent, while U.S. West Texas Intermediate crude futures are facing a weekly loss of approximately 1.5 percent.
Investors will closely monitor any developments in global macroeconomic conditions, as well as any further changes in Russia’s fuel export policies. These factors will continue to influence oil prices in the coming weeks.
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