Oil futures: Crude prices climb amid cautious rebound, Brent above $89/b
Quantum Commodity Intelligence – Crude oil futures Thursday were trading higher, recovering from the seven-month lows seen in the previous session but gains were capped following the latest EIA data.
Front-month November ICE Brent futures were trading at $89.22/barrel (1835 GMT), compared to the day's high of $89.83/b and Wednesday's settle of $88.00/b.
At the same time October NYMEX WTI was trading $83.53/b, versus Wednesday's settle of $81.94/b.
The latest threat from Russia to choke off oil supplies to Europe did little to halt the downwards spiral on Wednesday, but has acted as a reminder of the potential energy supply crunch in Europe this winter.
"There are contractual obligations, supply contracts. But if any political decisions are made that contradict the contracts, we simply will not comply with them. We will not supply anything at all if it contradicts our interests," Russia's President Putin said at the Eastern Economic Forum.
But oil markets were again overshadowed by fears of a global slowdown, furthered by China's growing Covid problem as Chengdu, the capital of the south-western Chinese province of Sichuan, extended the coronavirus lockdowns indefinitely to most districts.
Market resolve was further tested by the latest weekly data from the Energy Information Administration, which showed US crude stocks last week surged 8.884 million barrels, while gasoline inventories were up 333,000 barrels and distillates up 95,000 barrels.
The American Petroleum Institute late Wednesday reported US commercial crude inventories increased by 3.4 million barrels last week, the largest API crude build in two months. Gasoline stocks posted a drop of 836,000 barrels and distillate inventories increased by 1.833 million barrels.
SPR
In a separate report from the Energy Information Administration, continued sales from the SPR are expected to remain at a rate of around 1 million bpd in the short term, including 30 million bpd in September and 32.6 million bpd in October.
The EIA said, however, in its monthly report that it expects global crude demand to increase in the fourth quarter of 2022 and the first quarter of 2023, as rising gas prices drive countries to switch to oil in winter.
"Don't underestimate the oil-to-gas switching that needs to occur... when we get to the end of September and beyond we expect that to resurface, significantly, like 1 million bpd of gas-to-oil substitution," said Jeff Currie, head of commodities research at Goldman Sachs.
But adding to the downwards pressure on oil Thursday, Dutch TTF futures for Oct22 traded below €200/MWh, more than 40% lower from the record €348/MWh traded in late August, before recovering later in the session to close around 3% higher at €220/MWh.
Meanwhile, as expected the European Central Bank raised interest rates by 75 basis points to tackle record inflation, despite fears the eurozone is already heading into recession because of soaring energy prices. The US Federal Reserve meeting follows on 21 Sept.
Weather watchers report little in the way of threats to the Gulf of Mexico. The next storm system that the NHC is watching is just west of the Cabo Verde islands but is only given a 60% chance of forming into a storm in the next five days by the storm-watch agency.
