Oil futures: Brent up over 3% on European energy security fears, EIA data

28 Sep 2022

Quantum Commodity Intelligence - Crude oil futures Wednesday were comfortably higher, having clawed back earlier losses as concerns over European energy security countered bearish indicators from the soaring dollar and broader demand fears, while US stocks data also bolstered prices.

Front-month November ICE Brent futures were trading at $88.89/b (1730 GMT), compared to the day's low of $84.26/b versus Tuesday's settle of $86.27/b, while the more-liquid Dec22 contract was trading at $87.56/b.  

At the same time, Nov22 NYMEX WTI was trading at $81.42/b versus Tuesday's settle of $78.74/b.

The suspected sabotage of the Nord Stream pipelines was seen as potentially heightening European energy security, with the EU reportedly scrambling to secure key energy hubs and associated infrastructure.

Meanwhile, the EU is expected to plough through with its price cap proposals on Russian oil despite opposition from at least two members of the bloc, which traders say will further disrupt Russian energy supplies.

Latest weekly data from the Energy Information showed US crude stocks last week Administration dropped a modest 215,000 barrels, while gasoline was down 2.42 million barrels and distillates up 0.69 million barrels.

Inventory levels beat expectations as consumption was also higher on the week.

The American Petroleum Institute reported late Tuesday that US commercial crude inventories increased by 4.15 million barrels last week. Gasoline stocks were down 1.05 million barrels and distillate inventories increased by 0.44 million barrels.

The Dollar Index ramped back up to fresh 20-year highs of above 114.50 points, hitting oil prices earlier in the session, before dropping back below 113 points later in the day. 

Goldman Sachs slashed its Q4 forecast to $100/b versus its previous forecast of $125/b.


Most analysts expect OPEC+ to pull the trigger on output cuts when the alliance meets next week, with Russia and Saudi Arabia said to be considering a group reduction of around 1 million bpd. 

"With Brent trading only a little above $80 and WTI below, you have to wonder how much more OPEC+ will tolerate and the size of output cut they may be considering next week in light of the new economic outlook and price," said Craig Erlam, senior market analyst at Oanda.

Hurricane Ian briefly supported oil prices as platforms in the eastern Gulf of Mexico were forced to suspend production. However, with the storm heading for Florida, the disruption to oil output is expected to be brief.

The latest numbers from the Bureau of Safety and Environment Enforcement (BSEE) show that 11% of US GoM oil production has been shut, whilst 8.56% of natural gas production has also been shut.

TTF natural gas prices rallied around 7% when the Nord Stream news broke Tuesday and another 11% Wednesday.