Oil prices rose on Friday, but still recorded their largest weekly decline since March, as Russia once again partially lifted its fuel export ban, exacerbating demand concerns caused by macroeconomic unfavorable factors.
WTI November crude oil futures closed up $0.48, or 0.58%, at $82.79 per barrel, with a cumulative decline of 8.81% this week.
Market News Analysis
This week, Brent crude oil fell by about 11%, while WTI fell by over 8% due to concerns that sustained high interest rates will slow global economic growth and hit fuel demand, even if Saudi Arabia and Russia curb supply. They will continue to reduce supply until the end of the year.
Russia has announced the lifting of the ban on diesel exports for transporting supplies to ports through pipelines. The company still needs to sell at least 50% of its diesel production to the domestic market.
On October 6th, the Russian Ministry of Foreign Affairs stated that, at the request of Armenian leaders, Russia has initiated a transaction to supply 15000 tons of gasoline and 20000 tons of diesel to Armenia.
It is reported that Russia will extend the period of imposing prohibitive export taxes on more fuels until 2026, lift the ban on diesel exports, maintain the ban on gasoline exports, and raise tariffs on gray exporters such as fuel oil and gasoline.
The export volume of Azerbaijan BTC crude oil from Jahan Port in November was 17.97 million barrels, compared to 19.06 million barrels in October.
OPEC has raised its mid to long-term oil demand forecast. Three sources from OPEC said that in an upcoming report, OPEC has raised its mid to long-term oil demand forecast, highlighting the oil export organization's more positive view compared to other forecasting agencies, despite the global transition to renewable energy. The latest long-term oil demand forecast will be released by OPEC in its "2023 World Oil Outlook" scheduled for October 9th. Higher oil demand will provide a boost to oil producing countries and OPEC, highlighting the need for sustained investment. Compared to the International Energy Agency (IEA) and other forecasting agencies, this also highlights OPEC's more optimistic view on the outlook for oil demand. Sources say demand is still on the rise. During the past 18 months of high oil prices, oil usage has shown resilience.
According to statistics from the US Department of Labor, the US employment growth in September was 336000, far exceeding economists' forecast of 170000. Statistical data has mixed opinions on oil prices. Analysts say that a strong US economy may boost recent oil demand sentiment, but on the contrary, statistics have led to a stronger US dollar and increased bets on another interest rate hike in 2023.
A stronger US dollar is usually detrimental to oil demand, making the commodity relatively more expensive for other currency holders. ING analysts stated in a report that "today's (employment) data still holds the prospect of raising interest rates again, and certainly supports the Federal Reserve's argument that higher interest rates need to be maintained for a longer period of time
After the news spread, the price difference between diesel and Brent crude oil futures fell to its lowest level since July, at $23.59 per barrel, but has since rebounded to $25.84 per barrel.
However, reports of stronger tourism activities in China currently provide support for crude oil prices. According to Xinhua News Agency, tourism during the Mid Autumn Festival and National Day holidays in China increased by 71.3% year-on-year and 4.1% compared to 2019, reaching 826 million people. But with the end of China's golden holiday and the arrival of the US school season, the demand for crude oil will decrease.
Energy service company Baker Hughes said on Friday that the number of oil drilling platforms in the United States decreased by 5 this week to 497, the lowest number since February 2022, indicating that future supply in the United States will continue to decrease.
But the decline in oil may not have completely come to an end. Some people do not believe that the decline in oil prices has come to an end. OANDA market analyst Ed Moya said, "Given the macroeconomic background indicating that the resilience of the US economy will not disappear, crude oil prices are trying to find a bottom." "The significant correction in oil prices is about to end, but the last surge in the US dollar after the release of non farm employment data may cause WTI crude oil prices to hit the $80 per barrel level
Sunil Kumar Dixit, a product chart analyst at SKCharting. com, also has a similar viewpoint. If WTI cannot continue to find buyers next week, it may fall to $81 per barrel, with subsequent support at $77 per barrel
As of the week ending October 3rd, data from the Intercontinental Exchange (ICE) showed that the net long speculative position in gasoline futures decreased by 448 contracts to 48895 contracts; The net speculative long position of Brent crude oil futures decreased by 25207 contracts to 218335 contracts.
Summary of institutional comments
(1) Concerns about the health of the global economy and future oil demand are at the core of the sell-off, "said SEB analyst Bjarne Schieldrop
(2) The RoboForex team stated, "Brent crude is testing the lower limit of the bearish channel. The currency pair is currently below the equilibrium table cloud, indicating a downward trend
(3) Richard Snow, a strategic expert, said: "The rising yield of US treasury bond bonds and the continuous rise of the US dollar may expand the selling in the short term." The EIA data shows a decrease in gasoline demand in the United States, which the market is not very satisfied with. The fact that the US economy is stronger than other countries has led many people to believe that the US economy may achieve a soft landing. Therefore, any fragile signs may cause a significant response. The problem of 'demand disruption' - a decrease in oil demand caused by rising oil prices - may be emerging
Next week, we will focus on financial data and events
October 9th (Monday)
(1) New RMB loans in China in September
(2) US Chamber of Commerce Employment Trends Index for September
(3) 2023 FOMC Voting Committee and Dallas Fed Chairman Logan delivers a speech on the US economic outlook and monetary policy
October 10th (Tuesday)
(1) Japan's August Trade Account
(2) Canada to October 6th National Economic Confidence Index
(3) Red Book Commercial Retail Sales Annual Rate for the Week from the United States to October 7th
(4) Federal Reserve Vice Chairman Jefferson delivers a speech
October 11th (Wednesday)
(1) September Core PPI Annual Rate in the United States
(2) Monthly rate of construction permits in Canada in August
(3) Federal Reserve Governor Waller delivers a speech on monetary policy
(4) Federal Reserve Governor Bowman delivers a speech
(5) European Central Bank Regulatory Commission Norte delivers a speech
(6) Republican members of the United States House of Representatives hold a meeting to vote for a new Speaker of the House of Representatives
October 12th (Thursday)
(1) US October EIA Short term Outlook for the Next Year US Crude Oil Production Expectation
(2) API crude oil inventory for the week ending October 6th in the United States
(3) Monthly GDP rate for the three months of August in the UK
(4) Annual rate of bank loans in Japan after quarterly adjustment in September
(5) September Unseason Adjusted CPI Annual Rate in the United States
(6) Number of initial claims for unemployment benefits in the United States for the week ending October 7th
(7) EIA Oklahoma Cushing crude oil inventory for the week ending October 6th in the United States
(8) EIA releases monthly short-term energy outlook report
(9) Federal Reserve releases minutes of its September monetary policy meeting
(10) The European Central Bank Announces Minutes of its September Monetary Policy Meeting
(11) OPEC Announces Monthly Crude Oil Market Report
October 13th (Friday)
(1) China's September CPI annual rate
(2) China calculates its trade account in US dollars in September
(3) Monthly rate of industrial output in the Eurozone in August
(4) Expected one-year inflation rate in the United States in October
(5) Initial Value of the University of Michigan Consumer Confidence Index for October in the United States
(6) European Central Bank President Lagarde delivers a speech
