Oil Is Slightly Lower
Concerns that high inflation and energy costs could drag the global economy into recession offset China’s continued accommodative monetary policy as oil prices fell in choppy trade on Monday
Brent oil futures fell 50 cents, or 0.55%, to $91.165 per barrel, recovering from a 6.4% drop the previous week. US WTI crude was down 56 cents, or 0.52%, at $85.061, following a 7.63% drop the previous week.
Inflation in the United States remains a hot topic, and with the Federal Reserve expected to raise rates at least until next year, there is concern that demand destruction will worsen.
China’s central bank left its benchmark interest rate unchanged for a second month, replacing medium-term policy borrowing expiring on Monday.
Beijing will tighten risk controls and increase energy supply capacity. China will increase reserve capacities for key commodities even further.
Oil supply is expected to remain tight after OPEC and its allies, including Russia, pledged to cut output by 2M barrels per day in October. A rift between the US and Saudi Arabia, OPEC’s de facto leader, could portend more volatility.
After OPEC+ cut its production target more than expected, portfolio investors and funds returned to the oil markets. They bought large amounts of crude oil futures and options again for the second week in a row.
More Crisis Measures Are in The Works for The EU
As the EU prepares measures to reduce volatility in the region’s largest market, European natural gas fell to its lowest level since June.
Benchmark futures fell 9.95%, aided by mild weather, consistent inflows of liquefied natural gas, and large winter stockpiles.
The European Commission will propose a temporary dynamic price limit for transactions on the Dutch Title Transfer Facility. It will, however, refrain from presenting a detailed plan for making it operational immediately, instead seeking government authorization to develop such a mechanism as a last resort.
Europe’s gas storage facilities are approximately 92% full, which is higher than the five-year average for this time of year, thanks to favorable weather and high levels of LNG imports. However, failure to reduce consumption and a colder-than-normal winter could quickly deplete reservoirs, making replenishment much more difficult next year, especially without the usual volumes of Russian gas. The European benchmark, Dutch front-month gas, fell for the third straight session to 127.982 euros per megawatt-hour, the lowest since June 22. The equivalent contract in the United Kingdom fell by 11,8%.
On Monday, Exxon said it had pulled out of Russia entirely after President Vladimir Putin seized assets following negotiations for an orderly transfer of a 30 percent stake in a major oil project.
Exxon declined to comment on whether it received any compensation for its assets, valued at more than $4,5B.
India’s oil and natural gas intend to invest in the new Russian entity that will manage the Sakhalin-1 project to retain a 20% stake in the asset.
