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Commodities

Oil Mixed on Week: Brent Falls Slightly, U.S. Crude up Amid Record Pump Prices

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© Reuters.

By Barani Krishnan

Investing.com — Crude prices were mixed on the week as Friday’s trading oil closed, with global benchmark Brent showing a slight weekly loss amid a continued holdout by Europe on a Russian oil ban, while U.S. crude rose on strong summer demand bets and supply tightness that have pushed pump prices to record highs.

Both Brent and U.S. crude’s West Texas Intermediate benchmark rose about 4% in Friday’s trade, extending their recovery from a near 10% loss in the first two days of the week sparked by fears that America might be tipped into recession from aggressive rate hikes by the Federal Reserve trying to beat the worst inflation in 40 years.

London-traded Brent settled at $111.55 a barrel, up $4.10, or 3.8%, on the day. For the week, it was down 0.7%.

New York-traded WTI settled at $110.49, up $4.36, or 4.1%. For the week, it rose 0.7%.

The divergence between Brent and WTI is “a story of two oils,” said John Kilduff, partner at New York energy hedge fund Again Capital.

“The holdout on an European embargo of Russian oil, particularly by Hungary, is limiting Brent’s upside, while WTI is basking in bullish glory from the refining crunch in fuels that’s sent U.S. pump prices to record highs,” Kilduff said.

Some European Union nations said on Friday that the push to ban Russian oil should probably be delayed to prioritize other sanctions against Moscow, particularly if the bloc could not win immediate consensus from Budapest for an embargo.

Saudi Arabia’s Energy Minister Abdulaziz bin Salman, meanwhile, tried to avert any blame on OPEC+ for the record high pump prices in the United States, saying it was a lack of U.S. refining capacity that was responsible for the crisis rather than supply from the global oil exporters alliance.

OPEC+ has managed to push crude prices up from their lows whenever it meets each month, by offering a meager production hikes at well below the market’s needs.

“The bottleneck [in U.S. fuel supply] now [has] to do with refining,” Abdulaziz told Bloomberg in an interview on Friday. “I did warn this was coming back in October. Many refineries in the world, especially in Europe and the US, have closed over the last few years. The world is running out of energy capacity at all levels.”

Record-high fuel prices are testing the mettle of U.S. consumers, with gasoline at above $4.50 per gallon at some US pumps while diesel retails at above $6.

The International Energy Agency cautioned on Thursday that soaring pump prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023. 

Economists, meanwhile, warn that the US economy, finally on the path to resilience after the damage wrought by the two-year-long coronavirus pandemic, could head for recession again from a one-two punch delivered by record-high fuel prices and Fed rate hikes.

Commodities

Oil falls 2.5% as U.S. refiners ramp up output, equities retreat

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© Reuters. FILE PHOTO: An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Mandatory credit Kyodo/via REUTERS

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices fell 2.5% on Wednesday, reversing early gains as traders grew less worried about a supply crunch after government data showed U.S. refiners ramped up output, and as crude futures followed Wall Street lower.

Brent crude settled down $2.82, or 2.5%, at $109.11 a barrel. U.S. West Texas Intermediate (WTI) crude fell $2.81, or 2.5%, to $109.59 a barrel.

Both benchmarks gave up early gains of $2-$3 a barrel following a change in risk sentiment as equity markets fell, said UBS analyst Giovanni Staunovo.

Brent remained at an unusual discount to WTI a day after settling below the U.S. benchmark for the first time since May 2020. Traders and analysts cited strong export demand and tightening U.S. crude stockpiles.

U.S. crude inventories fell by 3.4 million barrels last week, government data showed, an unexpected drawdown, as refiners ramped up output in response to tight product inventories and near-record exports that have forced U.S. diesel and gasoline prices to record levels. [EIA/S]

U.S. gasoline prices fell 5%, two days after touching a record high.

Capacity use on both the East Coast and Gulf Coast was above 95%, putting those refineries close to their highest possible running rates.

“While on the face of it, the report was extraordinarily bullish, they (refiners) are racing to put more refined product on the market… there’s obviously a refiners response,” said John Kilduff, a partner at Again Capital LLC.

The dollar strengthened and global stocks retreated on concerns about economic growth and rising inflation.

Bearish sentiment also followed reports that the United States is planning to relax sanctions against Venezuela and allow Chevron Corp (NYSE:CVX) to negotiate oil licenses with state producer PDVSA.

“The perception that we could see some more supply coming Venezuela coming into the market, along with the equity markets, it’s causing some profit taking in a much-needed technical correction in the crude,” said Dennis Kissler, senior vice president for trading at BOK Financial.

The European Union’s failure to persuade Hungary to lift its veto on a proposed embargo on Russian oil was adding price pressure, although some diplomats expect agreement on a phased ban at a summit at the end of May.

Ongoing supply concerns remained supportive. Russian crude output in April fell by nearly 9% from the previous month, an internal OPEC+ report showed on Tuesday, as Western sanctions on Moscow curbed exports.

On the demand side, hopes of further lockdown easing in China boosted expectations of a recovery. Authorities allowed 864 of Shanghai’s financial institutions to resume work, sources said, and China has relaxed some COVID test rules for U.S. and other travelers.

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Commodities

U.S. extends application deadline for nuclear power rescue program

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© Reuters. FILE PHOTO: Spent fuel storage is seen at the San Onofre Nuclear Generating Station near San Clemente, California, U.S., April 21, 2022. REUTERS/Nichola Groom

WASHINGTON (Reuters) – The U.S. Department of Energy said on Wednesday it has extended a deadline by 47 days, to July 5, for nuclear power plants to apply for federal funding to keep them running.

The first stage of the program is aimed at saving two plants, one in California and one in Michigan. The Biden administration wants to keep nuclear generators online because the industry generates more than half the country’s carbon-free electricity.

The DOE statement came two days after two industry trade groups, Edison Electric Institute and Nuclear Energy Institute, sent a letter to Energy Secretary Jennifer Granholm requesting the extension on behalf of their members.

“We received a request to extend the application period, which could keep at-risk reactors online, delivering much needed clean energy to the grid,” DOE’s assistant secretary for nuclear energy, Kathryn Huff, said in the statement.

Under the program, which was launched last month, owners of nuclear reactors that are scheduled to retire can apply for a portion of $6 billion in available funding.

Entergy Corp (NYSE:ETR)’s Palisades plant in Michigan, which may be eligible for the funding, is due to shut down on May 31. The Diablo Canyon facility in California, owned by PG&E (NYSE:PCG) Corp, is scheduled to retire in 2025.

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Commodities

Oil falls 2% as U.S. refiners ramp up output, equities retreat

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© Reuters. FILE PHOTO: An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Mandatory credit Kyodo/via REUTERS

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices reversed course and fell over 2% on Wednesday after government data showed U.S. refiners ramped up output, easing worries of a supply crunch, and as traders took cues from a drop in equities market.

Brent crude was down $2.41 cents, or 2.4%, at $109.52 a barrel at 12:05 a.m. ET (1605 GMT), while U.S. West Texas Intermediate (WTI) crude fell $2.5 cents, or 2.2%, to $1 09.85 a barrel.

Brent settled below WTI on Tuesday – the first time since May 2020 – and was still unusually trading at a discount due to strong export demand and tightening U.S. crude stockpiles.

U.S. crude inventories fell by 3.4 million barrels last week, government data said, an unexpected drawdown as refiners ramped up output in response to tight product inventories and near-record exports that have forced diesel and gasoline prices to record levels in the United States. [EIA/S]

Capacity use on both the East Coast and Gulf Coast was above 95%, putting those refineries close to their highest possible running rates.

“While on the face of it, the report was extraordinarily bullish, they (refiners) are racing to put more refined product on the market… there’s obviously a refiners response,” said John Kilduff, a partner at Again Capital LLC.

Both benchmarks also gave up earlier gains of $2-$3 a barrel following a change in risk sentiment as equity markets fell, said UBS analyst Giovanni Staunovo.

The dollar strengthened and global stocks retreated on Wednesday as concerns about economic growth and rising inflation soured sentiment.

Bearish sentiment also followed reports that the United States is planning to relax sanctions against Venezuela and allow Chevron Corp (NYSE:CVX) to negotiate oil licences with state producer PDVSA.

“The perception that we could see some more supply coming Venezuela coming into the market, along with the equity markets, it’s causing some profit taking in a much needed technical correction in the crude,” Dennis Kissler, senior vice president for trading at BOK Financial said.

The European Union’s failure to persuade Hungary to lift its veto on a proposed embargo on Russian oil was adding price pressure, although some diplomats expect agreement on a phased ban at a summit at the end of May.

Ongoing supply concerns, however, were still supportive. Russian crude output in April fell by nearly 9% from the previous month, an internal OPEC+ report showed on Tuesday, as Western sanctions on Moscow curbed exports.

On the demand side, hopes of further lockdown easing in China have boosted expectations of a recovery. Authorities allowed 864 of Shanghai’s financial institutions to resume work, sources said on Wednesday, and China has relaxed some COVID test rules for U.S. and other travellers.

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