By Myra P. Saefong and William Watts
Oil prices could rally to $100 in Q4: analyst
Oil futures ended lower on Thursday as pressure from concerns over the outlook for energy demand was partially offset by prospects of a production cut next week by the Organization of Exporting Countries. oil and its allies.
price action
Market factors
Oil prices held on to a gain for the week, bouncing off eight-month lows. A rally in the dollar gave way, after taking the US dollar index to a 20-year high, as traders turned their attention to the prospect of an OPEC+ production cut, which includes the Organization of Petroleum Exporting Countries and their allies.
But analysts said the tone for crude remained weak amid fears that aggressive monetary tightening by the Federal Reserve and other major central banks could sink the global economy, outweighing worries about the Russian-Ukrainian war and other supply problems.
“The absence of a disruption risk premium makes it clear: the market fears Fed Chair Powell more than it fears Fed escalation. [Russian President] Vladimir Putin or OPEC’s ability to defend the market,” Michael Tran, commodities analyst at RBC Capital Markets, said in a note.
A statement from the North Atlantic Treaty Organization said all “currently available information” indicates that the damage to the Nord Stream 1 and 2 pipelines that resulted in a series of leaks was the result of “acts of sabotage deliberate, reckless and irresponsible”. “NATO has not identified a perpetrator.
See: As Nord Stream’s fourth leak is discovered, here’s what scientists are saying about the environmental impact
See also: Nord Stream gas pipeline leaks remind Europe that it cannot rely on natural gas from Russia
Meanwhile, OPEC+ members discussed a potential production cut ahead of a meeting next week, Reuters reported. The report says Russia could suggest a reduction of up to one million barrels per day.
Tran, however, said OPEC+ faces a dilemma after Saudi Arabia previously complained of a disconnect between a soft futures market and a tight physical market.
“The group symbolically cut 100,000 barrels per day earlier this month. Deeper short-term cuts would signal a concession that physical demand is worse than initially assessed. Cut too little and the market ignores it,” said Tran. “It’s the Catch-22.”
Crude also found support from Hurricane Ian, which made landfall in Florida on Wednesday as a severe Category 4 storm. The Bureau of Safety and Environmental Enforcement had estimated Wednesday afternoon that about 9, 12% of current oil production and 5.95% of natural gas production in the Gulf of Mexico had been shut down.
See: Hurricane Ian: These stocks could feel the impact of the storm
On Thursday, U.S. natural gas futures fell sharply, seeking to undo all of Wednesday’s 2.9% rise and then some of it.
The US Energy Information Administration reported on Thursday that domestic natural gas supplies increased by 103 billion cubic feet for the week ended September 23. That compared to the average analyst forecast for a 93 billion cubic feet increase, based on a survey by S&P. Global commodity outlook.
Oil outlook
Matt Parry, head of long-term research at Energy Aspects, said he remained “optimistic” that prices would rally back above $100 in the fourth quarter.
“Fundamentals remain tight, but right now everyone is focused on the macro story,” he told MarketWatch. “Oil fundamentals have been bullish year-end and the physical market is already reflecting that.”
Once drawdowns from the Strategic Petroleum Reserve are complete, trading stocks will “draw aggressively,” he said.
“The price action in spreads this year clearly shows how weak stocks remain, even as trading stocks failed to pull,” Parry said.
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Also read: Timber prices have fallen more than 60% this year and could fall further
-Myra P. Saefong
(END) Dow Jones Newswire
09-29-22 1459ET
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