Singapore, Oct. 20 (BNA): Oil prices were mixed on Thursday as investors weighed caution about tight supply against concerns that a global slowdown would dampen demand.
December Brent crude futures were down 14 cents, or 0.15 percent, at $92.27 a barrel at 0305 GMT. US West Texas Intermediate crude for November delivery (WTI), which expires Thursday, was up 53 cents, or 0.6%, at $86.08 a barrel. The West Texas Intermediate crude contract for December delivery rose 0.3% to $84.78 a barrel, according to Reuters.
“Oil prices are affected by a number of drivers in the fourth quarter of 2022,” Commonwealth Bank commodity analyst Vivek Dar said in a note.
“Prices are facing downward pressure from global growth concerns, a stronger US dollar, and higher 10-year US nominal yields. Although upward pressure is coming from OPEC+ supply cuts and impending EU sanctions on seaborne imports of Russian oil and refined production.”
Oil prices were boosted by a looming European Union embargo on Russian crude and oil products, as well as production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, known as OPEC+.
OPEC+ agreed to cut production by 2 million barrels per day in early October – but analysts expect a slight drop in actual production by about 1 million barrels per day due to production shortfalls in countries such as Iran, Venezuela and Nigeria.
Separately, US President Joe Biden announced a plan Wednesday to sell the remainder of his release of the nation’s emergency oil reserves by the end of the year, or 15 million barrels of oil, and begin refilling the stockpile as he tries to curb future gasoline price hikes. Midterm elections on November 8.
The Commonwealth Bank’s Darr said the issuance was “too small to impact the market” and estimated it would increase global oil supply by just 0.04 million barrels per day.
“EU sanctions on Russian oil imports will likely become the focus of the oil market in the coming weeks… We expect Brent crude futures to average $100 a barrel in the fourth quarter of 2022 on the back of supply disruptions from EU sanctions,” Dhar added. .
Meanwhile, global fuel demand remains uncertain. The Federal Reserve (the US central bank) said on Wednesday in its report that US economic activity expanded modestly in recent weeks, although it held steady in some areas and declined in others, showing increasing corporate pessimism about the outlook.
China has also continued to impose severe restrictions on COVID-19 this year, hurting business and economic activity in the world’s largest importer of crude.
CMC Markets analyst Leon Lee said fears of a global recession and the possibility of a sharp interest rate hike in the US have clouded the outlook for oil prices.
“Therefore, oil prices will return to a downtrend after a short-term recovery,” he said.
The Fed is expected to raise rates again in November, and eventually raise rates to 4.75%-5% by early next year, if not more, after a government report showed inflation remained very high last month.
HF