An IPC Petroleum France oil pump at sunset outside Sodron, near Reims, France, August 24, 2022. REUTERS/Pascal Rossignol/File Photo
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NEW YORK (Reuters) – Oil prices settled higher on Monday, erasing weak demand expectations as supply concerns escalated as winter approaches.
Brent crude futures rose $1.16, or 1.3 percent, to $94.00 a barrel. US West Texas Intermediate crude closed up 99 cents, or 1.1%, at $87.78.
US emergency oil stocks fell by 8.4 million barrels to 434.1 million barrels in the week ending September 9, their lowest level since October 1984, according to data released Monday by the US Department of Energy.
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US President Joe Biden in March laid out a plan to release 1 million barrels per day over a period of six months from the Strategic Petroleum Reserve to address high fuel prices in the United States, which have contributed to rising inflation.
Energy Secretary Jennifer Granholm told Reuters last week that the Biden administration is considering the need for more SPR releases after the current program ends in October.
Global oil supplies are expected to shrink further when the European Union’s embargo on Russian oil takes effect on December 5th.
The Group of Seven will implement a Russian oil price cap to limit the country’s oil export earnings, in a bid to punish Moscow for invading Ukraine, while taking measures to ensure the continued flow of oil to emerging nations. Read more
However, the US Treasury has warned that the cap could lead to higher oil and gasoline prices in the US this winter.[nL1N30I0BQ[nL1N30I0BQ .][nL1N30I0BQ[nL1N30I0BQ
The European Commission is set to unveil, on Wednesday, a package of measures to help energy companies in the face of the liquidity crisis. Read more
France, Britain and Germany said on Saturday they had “serious doubts” about Iran’s intentions to revive the nuclear deal. Failure to revive the 2015 deal will keep Iranian oil off the market and global supplies tight. Read more
In more negative news for markets, Chinese oil demand may contract for the first time in two decades this year, as Beijing’s COVID-free policy keeps people indoors during the holidays and reduces fuel consumption. Read more
“Continuing headwinds from China’s renewed virus restrictions and further moderation in global economic activities may still raise some reservations about a more sustainable rally,” said Jun Rong Yip, market strategist at IG.
US domestic oil production is also set to rise in the coming months. The US Energy Information Administration said in its report that oil production in the Permian Basin in Texas and New Mexico, the largest basin of shale oil in the United States, is set to rise 66,000 barrels per day to a record high of 5.413 million barrels per day in October. Monday productivity report.
Meanwhile, the European Central Bank and the US Federal Reserve are prepared to raise interest rates further to tackle inflation, which could strengthen the US currency and make dollar-denominated oil more expensive for investors.
“A strong dollar will act as an inverse correlation to dollar-priced commodities, and is likely to act as a drag on upward gains in the energy market,” said Bob Yoger, director of energy futures contracts at Mizuho.
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Reporting by Laura Sanicola in New York Additional reporting by Noah Browning, Florence Tan and Jeslyn Lear; Editing by Deepa Babington and Matthew Lewis
Our criteria: Thomson Reuters Trust Principles.
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