Oil Breaks Multi-Week Winning Streak On Concerns Of Russia Contributing To Supply Tightness

However, traders  were equally concerned about reduced demand possibilities: File Image/Pixabay

Oil prices were mainly steady on Friday but fell for the week, as sentiment further headed into bearish territory with traders juggling demand concerns and the recent news of Russia’s fuel export ban.

Dennis Kissler, senior vice president of trading at BOK Financial, said, "Investors are anticipating a slack in demand coming into October as refineries go into maintenance and as a higher interest rate is going to further pressure markets" – a reference to the U.S. Federal Reserve earlier in the week warning of another rate hike before year-end.

On Friday, Russia's Transneft suspended deliveries of diesel to the key Baltic and Black Sea terminals of Primorsk and Novorossiysk, and traders regarded the former Soviet Union’s initiatives overall as contributing to a steady tightening of global supplies.

The ban, said to be temporary, does not apply to fuel supplied under inter-governmental agreements to members of the Eurasian Economic Union, which includes Belarus, Kazakhstan, Armenia and Kyrgyzstan.

RBC said in a note that the ban will "bring new uncertainty into an already tight global refined product supply picture and the prospect that the impacted countries will be seeking to bid up cargoes from alternative suppliers."

Tightening supply concerns were stoked by Baker Hughes, which reported that U.S. oil rig counts, an indicator of future production,  fell by eight to 507 this week, their lowest since February 2022; that puts the total rig count down 134 rigs, or 18 percent, below this time last year.

As a result, Brent on Friday settled 3 cents lower at $93.27 per barrel and broke a three week streak of gains by falling 0.3 percent in the week; West Texas Intermediate settled up 40 cents to $90.03 per barrel, breaking a month-long winning streak by falling 0.03 percent for the week.

In other oil related news on Friday, Laura Lau, CIO at Brompton Group, became the latest pundit in  a growing group that includes Chevron Corp. and Goldman Sachs Group Inc. to predict that oil could top $100 per barrel in the near future: in her case she predicted $105 per barrel.

Not to be outdone, Christyan Malek, JPMorgan’s head of EMEA energy equity research, warned on Friday that the Brent price surge could continue upwards to $150 per barrel by 2026, due to capacity shocks, an energy supercycle, and efforts to push consumers further away from fossil fuels.

Malek told Bloomberg, “Put your seatbelts on, it’s going to be a very volatile supercycle.”