Oil prices will end the week with a rare gain

Crude oil prices are on course to end the week with a rare gain in recent months, supported by the Fed’s decision to cut its key interest rate by 0.5%.

Both Brent crude and West Texas Intermediate were slightly lower earlier today in mid-morning Asian trade, but look set to end the week higher than it started, with WTI climbing from around $69 a barrel to near $72 a barrel. barrel at the time of writing. Brent crude looked poised to gain about $2 a barrel on the week.

Oil prices were also supported by U.S. crude inventories, which fell to a 12-month low last week, according to the Energy Information Administration’s weekly state of oil report. This reignited hopes of higher demand for pipeline oil, further supported by Citi’s latest offer update, which saw a shortfall of 400,000 bpd.

Turning to the Fed rate cut, commodity analysts at ING wrote in a note after the announcement that the cut had already been largely priced into benchmarks, saying that “For oil, this means attention is likely to turn to demand concerns. China has obviously been the main concern when it comes to demand, but there have also been reports of refineries in Europe reducing run rates due to poor margins.”

Indeed, there have been reports that European refiners are reducing their run rates because of poor margins. This, however, does not necessarily mean that the demand for fuels is decreasing. Bloomberg just reported yesterday that diesel imports into the European Union and the UK were set to hit a 17-month high in September.

Average diesel and diesel flows, according to the report, stood at about 1.36 million barrels per day, based on Kpler tank tracking data. The maintenance season in the refining industry and reduced run rate due to weak margins tightened supply, even as demand remained low compared to previous years due to lower industrial activity.

By Irina Slav for Oilprice.com

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