Oil Declines Again Amid Mixed Messages Of Health Of Crude Market

Meanwhile, India resumes buying crude from Russia despite U.S. criticisms: File Image/Pixabay

Large supplies, declining demand, minuscule interest rate cut: that was the three-pronged impetus for continued oil trading on the bearish side on Friday, with two key commodities incurring another round of losses.

Brent settled down 76 cents at $66.68 per barrel, while West Texas Intermediate settled down 89 cents at $62.68 per barrel.

Regarding the quarter of a percentage point rate cut announced by the U.S. Federal Reserve on Wednesday, John Kilduff, founding partner at Again Capital, said, "We need a 50 [basis-point increase] to boost demand; the Fed's action is not translating to growth for the crude market due to underlying market fundamentals."

The perception of weakening demand seemed to be stoked by last week’s increase in U.S. diesel stockpiles (even though during the same time period crude inventories fell by a massive 9.29 million barrels and gasoline stocks fell by 2.3 million barrels to 217.6 million barrels, with gasoline demand rising by 302,000 barrels per day to 8.8 million bpd).

As usual, mixed messages about the state of the oil market abounded on Friday, with Bloomberg reporting that hedge funds “turned bullish on oil at the fastest pace in three months as geopolitical unrest in key producing regions of the world revived the risk premium in crude prices.”

The news agency went on to state that money managers “increased their net-long stance on West Texas Intermediate by 26,247 lots to 38,904 lots in the week ended Sept. 16, the largest gain since June…..the net increase was largely driven by a drop in bearish bets in both U.S. and Brent crude."

In other oil news on Friday, sources familiar with the matter told media that India will continue to buy Russian crude in the coming months, with active purchases for cargoes loading in November and December.

This came amid perceptions that recent tensions between India and the U.S. over the former’s activities were easing, based largely on U.S. president Donald Trump wishing India’s prime minister Narendra Modi a happy birthday and thanking him for helping to end the war in Ukraine.

Although India has returned to buying crude from the former Soviet Union, it is hedging its bets with procurement of more volumes from the U.S., Brazil, and West Africa.