Oil futures: Crude higher after Russia bans diesel exports

Quantum Commodity Intelligence – Crude futures Friday were slightly higher as markets consolidated after a volatile week that saw both Brent and WTI surge to 10-month highs before easing off.

However, having posted gains for the previous three weeks, oil prices were on course to record a weekly loss following the hawkish narrative from the US Federal Reserve on interest rates, which overshadowed concerns over the supply/demand deficit that had been driving prices higher.

Front-month Nov23 ICE Brent futures were trading at $93.29/b (1720 GMT), compared to Thursday's settle of $93.30/b and having reached almost $96/b earlier in the week.

At the same time Oct23 NYMEX WTI was trading $90.01/b versus Thursday's settle of $89.63/b, although a late selloff wiped more than a $1/b off the day's highs.

Last Friday, Nov23 Brent closed at $93.93/b, while Nov23 WTI settled at $90.02/b, while still gained around 25% since the beginning of July.

Benchmarks had slumped by around $4/b from the 2023 highs after the Fed flagged at least one more interest hike for the year while dampening prospects for speedy rate cuts in 2024, but prices rebounded after Russia announced Thursday a ban on diesel and gasoline exports.

"Crude oil bounced off lows after Russia banned diesel export, which included gasoline. The action reversed a downside movement in crude markets following the hawkish Fed decision," said CMC Markets analyst Tina Teng.

European diesel prices spiked 5% on Thursday after Russia said it would impose temporary restrictions on gasoline and diesel exports in an effort to cool rising prices at home. Cracks were up over $4/b on the day.

"Russia is the second-largest exporter of diesel, with just the US exporting larger volumes. As a result, this is a key development as we head into the northern hemisphere winter, a period where we usually see a seasonal pick-up in demand," noted ING Bank.

"We believe that margins will remain elevated in an attempt to get refiners to increase run rates," added ING, but cautioned, "the ability to significantly increase run rates and increase middle distillate supply could be difficult."

HSBC became the latest bank to increase price forecasts, lifting Q4 Brent to $90/b versus an $80/b forecast in July, while calendar 2023 was hiked to $82.50/b, up from $75/b.

Morgan Stanley this week also raised its Q4 Brent forecast to $95/b a barrel from $82.5/b, while Q1 next year was increased to $92.50/b, versus $80/b previously.

Goldman Sachs also increased its 2024 price outlook for Brent prices to $100/b from $93/b, citing OPEC+ cuts and solid global demand growth.