Oil is at the $100 threshold
Oil prices fell at the end of Thursday's trading session after a volatile day. This drop came after Russia announced the lifting of a temporary ban on Turkish fuel exports, impacting the challenges faced by markets due to unfavorable economic conditions in the West, resulting in a $1 drop in oil prices at the start of trading.
In terms of prices, Brent crude futures for November delivery fell by 23 cents to reach $93.30 per barrel at the close, while West Texas Intermediate (WTI) crude futures dropped by three cents to $89.63 per barrel. Both crude oil benchmarks had risen by over a dollar earlier in the session.
Additionally, the Russian government announced on Thursday a temporary ban on the export of gasoline and diesel to all countries except for a group consisting of four former Soviet states. This ban was immediately implemented to stabilize the local fuel market in Russia, leading to a roughly 5% increase in heating oil futures during the trading session.
On the other hand, the US Federal Reserve decided in its previous session to keep interest rates unchanged, but indicated a more hawkish monetary policy stance in the future, with an expected quarter-point rate hike to a range between 5.50% and 5.75% by the end of the year. This decision may affect economic growth and global demand for fuel, and the rise in the value of the dollar has made oil and other commodities more expensive for buyers using non-dollar currencies.
Crude oil has surged during this quarter with Saudi Arabia and Russia extending production curbs until year-end and improving demand outlook, with Chinese refineries (the world's largest oil importer) boosting processing to record levels. This situation has led Chevron and Goldman Sachs to predict a return to $100 per barrel for oil prices.
The tightening market supports expectations for oil to return to the $100 per barrel level. Vandana Hari, the founder of consulting firm Vanda Insights, said, "The recent rally in crude oil seems to have lost some of its momentum, but as yesterday's volatility showed, oil markets can be erratic. Continuing concerns about supply disruptions could prevent a significant or sustained drop in prices.
Will oil exceed $100?
West Texas Intermediate (WTI) crude oil prices rose to nearly $90 per barrel on Friday but fell by approximately 1% over the week. Data from the Federal Reserve indicated that borrowing costs are likely to remain high for an extended period, which supported a stronger dollar and reduced the attractiveness of commodities as an investment. Technical studies also suggested that oil prices may have exceeded necessary levels at the moment.
However, there are still signs of tightening in the actual market. Russia announced a temporary ban on diesel and gasoline exports on Thursday, leading to price increases. Additionally, US crude oil inventories continued to decline, and price differentials associated with oil futures overcame backwardation, indicating increased competition for supplies in the near term.
Crude oil has experienced strong gains this quarter as Saudi Arabia and Russia extended production restrictions until year-end, and the demand outlook improved, with Chinese refineries (the world's largest oil importer) increasing processing to record levels. This situation prompted Chevron and Goldman Sachs to predict a return of oil prices to $100 per barrel.
Market tightening supports expectations for oil to return to the $100 per barrel level. Vandana Hari, the founder of consulting firm Vanda Insights, said, "The continuous rise in crude oil over the past few weeks has lost some of its momentum, but as yesterday's volatility showed, oil markets can be erratic. Additionally, ongoing concerns about supply disruptions may prevent a significant or sustained drop in prices.
