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Commodities

Why are crude oil prices rising? Concerns over Russian supplies 

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Crude oil price and dollar

Crude oil price and the dollar have always been linked. Oil prices rose on Monday amid positive sentiment on stock exchanges and a weakening U.S. dollar. Concerns over Russian supplies also supported the quotations. On the daily chart, the Brent futures form a kind of rising triangle with the upper bound of $107-108 per barrel. A break-up of this boundary might open the way to a further move to the area of $115-116 per barrel.

Why are crude oil prices rising? Russian oil and gas

As you can see, crude oil prices and charts began to rise on the back of recent news. Yesterday it became known that the flow of gas pipeline Nord Stream – 1 will again be limited. This time it is planned to shut down one more gas turbine engine “due to the end of the time between repairs”. Problems with gas supplies are perceived as an escalation of tensions between Russia and the EU in the energy sphere and increase anxiety in the market over Russian hydrocarbon supplies. Against such a backdrop, oil futures buyers are feeling more confident.

The volume of Russian exports is one of the key uncertainties in the second half of 2022 and in 2023. In December comes into force the European embargo on maritime oil supplies from Russia, and in February 2023 on the supply of petroleum products. Whether Russia will be able to avoid production cuts depends on how successful it will be in redirecting supplies to Asia. As of July 15, the average volume of Russian oil supplies to the Asian region was 1.7 million b/d, compared to 1.2 million b/d in January 2022. 1.3 million b/d is still going to Europe, for which new buyers have yet to be found.

Fed meeting

Tomorrow, the U.S. regulator will make an interest rate decision. According to the FedWatch Tool, markets are laying 77% odds that the rate will rise by 0.75pc, with another 23% accounting for 1pc. Even more important will be the Fed’s view of future monetary policy: whether the regulator is willing to raise rates further in an attempt to cool inflation. The more decisive the Fed will be in raising rates, the more the markets will fear an economic recession and a possible cooling of oil demand. Lower demand could make up for capacity shortages and lower prices. Crude oil prices and futures began to rise. 

WTI contracts at $8.5 lower

U.S. WTI discount to Brent by more than $8 a barrel amid cooling U.S. gasoline demand. Gasoline prices have been falling steadily over the past week. The national average price per gallon was $4,355, down from $4,521 a week ago, according to the AAA Automobile Association. Experts expect a $4 per gallon increase in the coming weeks.

Why are crude oil prices rising today? Demand for gasoline cannot be called weak, but it is lower than it was in July of last year. Last week, EIA data showed fuel inventories rising, and that put pressure on prices, even though the rest of the indicators were rather bullish. This week, the dynamics of gasoline inventories in the U.S. may remain the focus of investors’ attention.

As of this morning, Brent futures are up 1.8% and trading around $107 a barrel.



Commodities

Oil falls as China stimulus fails to boost sentiment, US dollar strength

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By Arunima Kumar

(Reuters) – Oil prices fell on Monday (NASDAQ:), after China’s stimulus plan disappointed investors seeking fuel demand growth in the world’s No. 2 oil consumer and as the U.S. dollar edged higher.

futures fell $1.10, or 1.5% to $72.77 a barrel by 1101 GMT while U.S. West Texas Intermediate crude futures were at $69.17 a barrel, down $1.21, or 1.7%.

Both benchmarks fell more than 2% on Friday.

The dollar firmed 0.40%, as traders prepared for a key reading of U.S. consumer inflation this week, as well as a parade of Federal Reserve speakers, including Chair Jerome Powell on Thursday.

A stronger dollar makes greenback-denominated commodities such as oil more expensive for holders of other currencies and tends to weigh on prices.

In China, consumer prices rose at the slowest pace in four months in October while producer price deflation deepened, data showed on Saturday, even as Beijing doubled down on stimulus to support the sputtering economy.

“Chinese inflation figures were again weak, with the market fearing deflation, particularly as the yearly change in the producer price index fell further into negative territory…, Chinese economic momentum remains negative,” said Achilleas Georgolopoulos, market analyst at brokerage XM.

The latest support measures will not revive China’s oil demand growth or imports, said Tamas Varga, analyst at oil broker PVM.

“After last week’s U.S. presidential election attention is slowly drifting back to the underlying fundamentals,” Varga said.

Oil prices also eased after concerns about potential supply disruptions from storm Rafael in the U.S. Gulf of Mexico subsided.

More than a quarter of U.S. Gulf of Mexico oil and 16% of output remained offline on Sunday, according to the offshore energy regulator.

Looking ahead, there were also concerns that U.S. oil and gas output could rise under the new Trump administration although analysts say 2025’s production forecast is unlikely to change.

© Reuters. FILE PHOTO: A pumpjack operates at the Vermilion Energy site in Trigueres, France, June 14, 2024. REUTERS/Benoit Tessier/File Photo

“We think producers may think twice about turbo-charging U.S. supply in an era when OPEC+ has already staked out plans to gradually raise production targets over the course of 2025,” Tim Evans of Evans Energy said in a note.

Trump’s election promise of hiking import tariffs to boost the U.S. economy has clouded the global economic outlook although expectations that he could tighten sanctions on OPEC producers Iran and Venezuela and cut oil supply to global markets partly caused oil prices to gain more than 1% last week.

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Commodities

Oil prices plunge as China stimulus underwhelms, US hurricane risk abates

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Investing.com– Oil prices fell Monday as more fiscal stimulus measures from top importer China underwhelmed, while a hurricane in the Gulf of Mexico appeared to have a limited impact on U.S. production.

At 07:45 ET (12:45 GMT),  fell 1.8% to $72.56 a barrel, while dropped 2% to $69.00 a barrel. 

China stimulus underwhelms 

Prices extended losses from Friday after Beijing approved about 10 trillion yuan ($1.4 trillion) in measures aimed at lowering government debt levels. But a lack of targeted measures for private consumption largely left investors wanting more, especially as data over the weekend showed persistent Chinese deflation.

China’s new stimulus measures disappointed investors hoping for more, especially as the world’s biggest oil importer did not announce measures specifically aimed at improving private spending. 

Analysts at ANZ said the gaps in stimulus were to accommodate for potential headwinds from a change in U.S. administration, after Donald Trump won the 2024 presidential elections.

Trump has vowed to impose steep import tariffs against China, heralding more economic headwinds for the country. 

Data released over the weekend also showed Chinese consumer inflation contracted in October, while producer inflation shrank for a 25th consecutive month.

“Markets were left underwhelmed by China’s debt package, which will help alleviate local government debt and allow them to implement more stimulus measures. In addition, a Trump presidency is seen as relatively more bearish for energy markets. However, the key risk to this view is if President Trump chooses to strictly enforce sanctions against Iran. This would erase the surplus expected over 2025,” said analysts at ING, in a note.

US supply fears abate as Hurricane Rafael weakens 

Hurricane Rafael weakened into a tropical storm over the Gulf of Mexico, and is expected to weaken further in the coming days.

The storm is now projected to pose a limited threat to oil production in the region, heralding fewer supply disruptions.

Chevron (NYSE:) stated on Sunday that has started redeploying personnel and restoring production at its Gulf Of Mexico platforms that were closed for Hurricane Rafael.

Chevron operates six platforms in the Gulf of Mexico – Anchor, Blind Faith, Jack/St. Malo, Tahiti, Petronius, and Big Foot.

Speculators increased crude longs 

The latest positioning data shows that speculators increased their net long positions in ICE in the lead-up to the US election.

Speculators bought 32,238 lots over the last reporting week to leave them with a net long of 126,145 lots as of last Tuesday. Similarly, speculators increased their net long in NYMEX WTI by 48,143 lots to 143,985 lots.

“Softer fundamentals through next year suggest little reason for speculators to jump into the market. However, there are clear risks, including OPEC+ deciding to further delay the unwinding of their supply cuts next year,” ING added.

(Ambar Warrick contributed to this article.)

 

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Commodities

Labor dispute stops Canadian canola oil, forestry exports from West Coast

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By Ed White

(Reuters) – Canada’s exports of canola oil and forest products from West Coast ports have halted due to a labor dispute, producers said on Thursday.

The stoppage, which started on Monday (NASDAQ:), involves limited strike action by the longshore foremen and a full lockout of Local 514 of the International Longshore and Warehouse Union by the B.C. Maritime Employers Association.

While bulk grain shipments are exempt from the British Columbia action, canola oil and forestry products are not covered by that federal labor code provision and are not being loaded onto ships at Pacific ports.

Based on the market price of canola oil, each day without shipments represents C$4 million in lost revenue, said Chris Vervaet, the executive director of the Canadian Oilseed Processors Association, which says it represents about 95% of Canada’s canola and soybean crush capacity.

“We really implore the government to get involved and really help both sides to a resolution.”

Federal Labor Minister Steven MacKinnon has said both sides have a responsibility to reach an agreement. On Thursday he criticized the lack of apparent progress between the union and employers as well as a smaller shutdown affecting some container traffic at the Port of Montreal.

“Both sets of talks are progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved,” said MacKinnon in a post on social media platform X.

Vervaet said Canada exports about one million metric tons of canola oil through the Port of Vancouver yearly.

Canada is the world’s top exporter of the oilseed, and canola oil is the most valuable part of the crop.

© Reuters. International Longshore and Warehouse Union Local 514 members and supporters march to the Port of Vancouver amid a labour dispute, in Vancouver, British Columbia, Canada November 8, 2024. REUTERS/Jennifer Gauthier

The Forest Products Association of Canada also called for federal government intervention.

Wood, pulp, paper and byproduct shipments by the organization’s members make up about 17% of Vancouver’s container exports and 14% of Montreal’s.

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