Oil prices remained flat on Friday, but closed the week lower due to profit-taking and markets focusing on supply concerns arising from Russia’s fuel export ban and demand problems arising from possible future interest rate increases.
Brent futures closed down 3 cents at $93.27 a barrel. It fell 0.3% for the week, breaking a three-week winning streak.
West Texas Intermediate crude oil (WTI) futures rose 40 cents, or 0.5%, to $90.03 a barrel as U.S. rig count fell. The benchmark index lost 0.03% during the week, its first decline in four weeks.
Investors, who make some profits, predict that there will be a stagnation in demand in October as refineries undergo maintenance and high interest rates put pressure on the markets.
Brent and WTI have risen more than 10% in the previous three weeks due to concerns about supply shortages.
US Federal Reserve officials warned of further interest rate hikes even though they voted to keep the benchmark federal funds rate steady at this week’s meeting.
Inflation is still very high, and it would probably be expected for the Federal Open Market Committee to raise rates further and keep them at a more restrictive level for a while.
A possible increase in energy prices is surely a particular risk foreseen.
Higher interest rates increase borrowing costs, which can slow economic growth and reduce demand for oil.
Meanwhile, Russia’s temporary ban on gasoline and diesel exports to most countries is expected to cause further supply contraction.
Russia’s Transneft suspended diesel deliveries to key Primorsk and Novorossiysk terminals on the Baltic and Black Seas on Friday, state media agency Tass announced.
The ban will add new uncertainty to an already tight global refined product supply picture, increasing the likelihood that affected countries will seek cargo offers from alternative suppliers.
Russian wholesale gasoline prices on the St. Petersburg International Commodity Exchange fell nearly 10% on Friday, while diesel fell 7.5%.
U.S. oil rig counts, an indicator of future production, also fell by eight this week to 507, the lowest since February 2022, Baker Hughes said.
Refineries in the United States routinely perform maintenance in the fall after hard work to meet fuel demand from the summer driving season. Offline refinery capacity is expected to reach 1.4 million barrels per day (bpd) this week, compared to 800,000 bpd last week, according to IIR Energy.
The U.S. Commodity Futures Trading Commission said money managers increased their net long U.S. crude futures and options positions during the week of Sept. 19.
The rise in oil and fuel prices does not change the ECB’s target of bringing inflation back to 2% by 2025, Bank of France governor Francois Villeroy de Galhau, a member of the European Central Bank’s (ECB) governing council, said on Saturday. Villeroy also reiterated that ECB interest rates are at a good level and called for patience.