Oil prices rise on Russian export ban

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Singapore, Sept 22, 2023 – Oil prices rose on Friday as concerns that a Russian ban on fuel exports could tighten global supply outweighed fears that further U.S. interest rate hikes could dent demand, but they were still headed for their first weekly loss in four weeks.

Brent futures climbed 46 cents or 0.5% to $93.76 a barrel by 0630 GMT, while U.S. West Texas Intermediate crude (WTI) futures gained 65 cents, or 0.7%, to $90.28 a barrel.

Both benchmarks were on track for a small weekly drop after gaining more than 10% in the previous three weeks amid concerns about tight global supply as the Organization of the Petroleum Exporting Countries and allies (OPEC+) maintain production cuts.

“Trading remained choppy amid a tug-of-war between supply fears that were reinforced by a Russian ban on fuel exports and worries over slower demand due to tighter monetary policies in the United States and Europe,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

“Going forward, investors will focus on whether the OPEC+ production cuts are being implemented as promised and whether the rise in interest rates will reduce demand,” he said, predicting WTI to trade in a range of around $90-$95.

Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect to stabilise the domestic fuel market, the government said on Thursday.

The shortfall, which will force Russia’s fuel buyers to shop elsewhere, caused heating oil futures to rise by nearly 5% on Thursday.

“Crude oil bounced off a session low after Russia banned diesel exports, which included gasoline. The action reversed a downside movement in crude markets following the hawkish Fed decision,” said Tina Teng, an analyst at CMC Markets, in a note.

“However, mounting fears of a recession in the Eurozone could continue pressuring oil prices.”

The U.S. Federal Reserve 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 buoyed fears that higher rates could dampen economic growth and fuel demand while boosting the U.S. dollar to its highest since early March, making oil and other commodities more expensive for buyers using other currencies.

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.

A European Central Bank (ECB) governing council member said the central bank will most likely keep interest rates stable at its next policy meeting. (Reuters)

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