Oil prices surge to highest since late September

Today’s headlines

What’s happening: Crude oil prices rose on Wednesday following a report showing higher US oil consumption.

What happened: Oil prices jumped to a one-week high with the sanctions against Russia expected to continue due to the failure of reaching a peace agreement with Ukraine.

Oil prices remain supported by a lower-than-expected increase in production by the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) for November.

Why it matters: The weekly report released by the Energy Information Administration (EIA) showed higher oil consumption despite a larger-than-expected surge in crude inventories.

US crude inventories rose 3.7 million barrels in the week ended October 3, more than market estimates of 1.9 million barrels.

Meanwhile, crude stockpiles at the Cushing, Oklahoma delivery hub declined by 763,000 barrels last week. Gasoline inventories also declined by 1.6 million barrels, more than market estimates of 1.05 million barrels, while distillate stockpiles contracted by 2.018 million barrels versus market expectations of a decline of 1.23 million barrels.

Petroleum products supplied, which is a proxy for oil consumption in the US, surged to 21.990 million barrels per day last week, the highest since December 2022.

Oil prices also received support from the lack of progress in signing a peace deal with Ukraine, which meant that Russian supply would remain out of most of the global markets. Russia was the world’s second-biggest producer of crude oil after the US in 2024.

Expectations of rate cuts by the US Federal Reserve also lent support to crude prices. There have been no major economic releases since the federal government shutdown.

The US central bank is widely expected to cut interest rates by 25 basis points at this month’s meeting amid risks to the labour market. Lower rates generally provide a boost to economic growth, which in turn raises oil demand.

Brent crude prices gained 80 cents, or 1.2%, to close at $66.25 per barrel on Wednesday, while WTI crude rose 82 cents, or 1.3%, to finish at $62.55 per barrel. Brent crude recorded its highest settlement since September 30, while WTI notched its highest close since September 29.

What to watch: Investors will continue monitoring progress related to the Russia-Ukraine peace deal.

The EIA is scheduled to publish data on the change in natural gas stockpiles (1830 UAE Time) today. US natural gas inventories, which rose 53 billion cubic feet in the week ending September 26, are expected to climb 76 billion cubic feet in the recent week.

The markets today

European stocks in focus today ahead of the ECB’s monetary policy meeting accounts

Context: Equity markets in the Europe settled at record highs on Wednesday, after ending the previous two sessions in the red.

Details: European stock markets received a strong boost from banks and industrial giants on Wednesday as investors monitored the impact of new tariffs on the European Union.

The European Union announced plans to slash tariff-free steel import quotas after increasing tariffs on the metal to 50%, which provided a boost to steelmakers, including ArcelorMittal, ThyssenKrupp and Aperam.

Key financial firms were among the top performers during the session, following a strong session for government bonds. Shares of Santander, Allianz and UniCredit recorded gains, while luxury brands and industrial giants, including LVMH, Siemens and Hermes, also settled higher.

Shares of automakers bucked the overall market trend, closing the session lower. BMW’s stock fell more than 8% after the company lowered its earnings outlook for 2025 amid sluggish growth in China’s market.

The STOXX Europe 600 Index rose 0.79% to close at 573.79 on Wednesday. London’s FTSE 100 gained 0.69% to close at 9,548.87, Germany’s DAX 40 added 0.87% and France’s CAC 40 jumped 1.07%.

What to watch: Investors await the release of monetary policy meeting accounts (1530 UAE Time) from the European Central Bank today. The ECB had maintained its key interest rates at the recent policy meeting, keeping the main refinancing rate at 2.15%, deposit facility at 2.00%, and marginal lending rate at 2.40%, in-line with market expectations. EU’s inflation rate has remained near the 2% target, while the inflation outlook has been mostly unchanged from June.

Other Markets: US trading indices closed mostly higher on Wednesday, with the S&P 500 and Nasdaq 100 up by 0.58%, and 1.19%, respectively, and the Dow Jones index down by 1.20 points.

The news shaping the markets

The Russian Ministry of Defence said that forces had gained control of the settlement of Novohryhorivka in the Zaporizhia region of Ukraine. The news sent the RUB/USD pair higher in forex trading this morning.

Germany’s government raised its 2025 growth outlook to 0.2% from a zero-growth estimate in April, which lent support to the EUR/USD forex pair.

Indonesia’s motorbike sales jumped 7.3% year-over-year to 567,173 units in September. This being a significant acceleration from the 0.7% growth recorded in the previous month sent the IDR/USD pair higher in forex trading this morning.

UK’s house price balance rose 4 points to -15 in September. The figure topping market estimates of -18 lent support to the GBP/USD forex pair.

Australia’s consumer inflation expectations accelerated to 4.8% in October, from 4.7% in the previous month. However, the AUD/USD pair rose in forex trading this morning.

What else to watch today

South Africa’s manufacturing production (1500 UAE Time), Turkey’s foreign exchange reserves (1530 UAE Time), Brazil’s inflation rate (1600 UAE Time), Mexico’s inflation rate (1600 UAE Time) and monetary policy meeting minutes (1900 UAE Time), as well as US 4-week Bill auction (1930 UAE Time), 8-week Bill auction (1930 UAE Time), 15-year Mortgage Rate (2000 UAE Time), 30-year Mortgage Rate (2000 UAE Time), WASDE report (2000 UAE Time) and 30-year Bond auction (2100 UAE Time).