Oil up slightly; trade choppy as Russia fuel export ban boosts, rate hikes weigh
Oil prices were slightly higher in choppy trading on Thursday, rising as much as $1 a barrel after a Russian ban on fuel exports snapped focus away from Western economic headwinds that had dropped prices $1 a barrel early in the session.
Gains were capped as global central banks signalled continuing tight policy.
Brent futures for November delivery rose 6 cents, or 0.7%, to $93.59 by 11:46 a.m. EDT (1646 GMT). U.S. West Texas Intermediate crude (WTI) climbed 36 cents, or 0.4%, to $90.02. Both benchmarks had both risen and fallen more than $1 earlier on Thursday.
Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect in order to stabilize the domestic fuel market, the government said on Thursday.
The shortfall will force Russia’s fuel buyers to shop elsewhere, prompting refiners to process more of a dwindling crude supply to meet that demand, said Tamas Varga of oil broker PVM.
“The Russian news came out and tension from the longer-term outlook immediately shifted back to supply,” said Vargas, referencing the U.S. Federal Reserve’s hawkish signals.
The Fed on Wednesday maintained interest rates, but stiffened its hawkish stance, projecting a quarter-percentage-point increase to 5.50-5.75% by year-end.
That could dampen economic growth and overall fuel demand. The U.S. dollar surged to its highest since early March, making oil and other commodities more expensive for buyers using other currencies.
U.S. unemployment benefit claims dropped to an eight-month low last week, the U.S. Labor Department reported. John Kilduff, partner at Again Capital LLC in New York, called this another factor that would encourage high interest rates.
“The Fed stance and a strong labor market has driven equities and commodities lower, pressuring oil,” said Kilduff.
The Bank of England mirrored the Fed and held interest rates on Thursday after a long run of hikes, but said it was not taking a recent fall in inflation for granted.
Norway’s central bank raised its benchmark interest rate on Thursday and, in a surprise move, said it would probably hike again in December.
Oil prices remained supported by concern about tight supply globally entering the fourth quarter. U.S. crude stocks at Cushing, the WTI delivery hub, are at their lowest since July 2022 and production cuts continuing by the Organization of the Petroleum Exporting Countries and allies.
Source: Reuters (Reporting by Paul Carsten and Natalie Grover in London and Laura Sanicola and Trixie Yap; Editing by Sonali Paul, Jane Merriman, Alexandra Hudson and David Gregorio)