Oil futures: Crude prices rebound as Chevron LNG talks fail
Quantum Commodity Intelligence – Crude oil futures Friday were climbing higher and heading for solid weekly gains, with tight supply/demand fundamentals seen lasting until the end of the year.
Front-month Nov23 ICE Brent futures were trading at $90.75/b (1645 GMT), compared to the day's low of $89.30/b and to Thursday's settle of $89.92/b.
At the same time Oct23 NYMEX WTI was trading $87.63/b versus Thursday's settle of $86.81/b.
Last Friday, Nov23 Brent closed at $84.48/b, while Oct23 WTI settled at $81.66/b.
The rally had initially stalled at the back end of the week amid lingering demand concerns from China and a possible interest rate rise from the US, which lifted the dollar index to 105 points this week for the first time since March.
Europe also remains a concern as Germany's industrial production registered a third consecutive monthly drop, while high energy prices are set to escalate costs for Europe's top industrial base further.
If planned strike action by Chevron's workers significantly curtails global LNG supplies, which Germany is increasingly reliant on, gas prices could see another hike.
Talks failed after resuming Friday between Chevron and Australian offshore unions, while extended strike action would likely see a spike in LNG costs, in turn boosting demand for diesel in the power sector.
LSGO prices trading in London were up around 2.5% following the Chevron news, while diesel prices also rallied after Russia curbed exports for this month.
Cuts
Most of the week's gains came after Saudi Arabia and Russia announced summer cuts would be extended to the end of the year, but markets also found support from US inventory data.
"We continue to think Saudi Arabia will reduce the cut only when it believes the oil market is stable enough to warrant it (i.e. when global oil inventories are lower than now)," said Giovanni Staunovo of UBS.
Meanwhile, Cat.5 Hurricane Lee is set to make a sharp turn to the north, but models are mixed on whether the storm will make landfall or stay over the Atlantic. If if does make landfall, a small cluster of PADD 1 refineries south of New York could be vulnerable, or further north a couple of coastal Canadian refineries could be in harm's way.
US commercial crude oil stocks fell for a fourth consecutive week to hit a 10-month low at the start of September, EIA data showed. US crude inventories dropped a further 6.3 million barrels to leave levels at 416.6 million barrels.
US gasoline stocks also recorded their steepest weekly decline since May as demand firmed in the week before the Labor Day holiday weekend, as inventories fell 2.67 million barrels to 214.7 million barrels.
This was in part countered as US diesel stocks registered a six-month high but were still 14% below five-year averages, according to data from the EIA.
