Oil gives up gains as soaring US dollar offsets Putin’s troop mobilisation

Investors this week have been bracing for another aggressive interest rate hike from the US Federal Reserve that they fear could lead to recession and plunging fuel demand

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Brent futures were 10 cents, or 0.1 per cent, lower at $90.52 a barrel by 1413GMT, while US West Texas Intermediate (WTI) crude fell 28 cents, or 0.3 per cent, to $83.66.

By Reuters

Published: Wed 21 Sep 2022, 7:08 PM

Last updated: Wed 21 Sep 2022, 7:09 PM

Oil prices gave up early gains on Wednesday as a soaring dollar and global recession fears offset worries about a Russian military mobilization.

A big increase in US crude stocks could also weaken oil prices. Analysts forecast US crude stocks rose 2.2 million barrels last week.

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On Tuesday, data from the American Petroleum Institute (API) industry group showed crude stocks rose one million barrels in the week to September 16.

Brent futures were 10 cents, or 0.1 per cent, lower at $90.52 a barrel by 1413GMT, while US West Texas Intermediate (WTI) crude fell 28 cents, or 0.3 per cent, to $83.66.

Both contracts were up more than $2 earlier in the session.

Putin said he had signed a decree on partial mobilisation, saying he was defending Russian territories and that the West wanted to destroy the country.

“The oil complex (advanced) largely off Putin’s apparent escalation of the Ukraine war,” analysts at energy consulting firm Ritterbusch and Associates said, noting the strong dollar and expected higher US interest rates will limit oil price gains.

Oil prices soared to a multi-year high in March after the Ukraine war broke out. European Union sanctions banning seaborne imports of Russian crude will come into force on December 5.

Investors this week have been bracing for another aggressive interest rate hike from the US Federal Reserve that they fear could lead to recession and plunging fuel demand.

The Fed is widely expected to hike rates by 75 basis points for the third time in a row later on Wednesday in its drive to rein in inflation.

The dollar was on track for its highest close against a basket of other currencies in over 20 years. A strong dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.

Signs of a recovery in Chinese demand, hit by Covid-19 shutdowns, had also helped lift prices earlier in the session.

At least three Chinese state oil refineries and a privately run mega refiner are considering increasing runs by up to 10 per cent in October from September, eyeing stronger demand and a possible surge in fourth-quarter fuel exports, people with knowledge of the matter said.

Meanwhile, the United States said that it did not expect a breakthrough on reviving the 2015 Iran nuclear deal at this week’s UN General Assembly, reducing the prospects of a return of Iranian barrels to the international market.

The Opec+ producer grouping — the Organisation of the Petroleum Exporting Countries and associates including Russia — is now falling a record 3.58 million barrels per day short of its production targets, or about 3.5 per cent of global demand. The shortfall highlights the underlying tightness of supply in the market. — Reuters

Reuters

Published: Wed 21 Sep 2022, 7:08 PM

Last updated: Wed 21 Sep 2022, 7:09 PM

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