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Crude oil gains amid tight supply woes

Tuesday, September 19, 2023

Today’s headlines

What’s happening: Oil prices recorded gains on Monday amid prospects of a supply deficit.

What happened: Saudi Arabia and Russia announced extended output cuts earlier this month, sending crude on an uptrend.

Oil prices rose to as high as $95 per barrel in intraday trading on Monday, before pared some gains.

Why it matters: Both WTI and Brent crude have been on a steep uptrend for the last three weeks and have hit their strongest levels since November 2022. Both benchmarks are on course to recording their biggest quarterly gains since the start of the Russia-Ukraine war in the first quarter of 2022.

Earlier this month, Saudi Arabia and Russia announced plans to extend their voluntary output cuts of a combined 1.3 million bpd (barrels per day) to the end of the year.

The US and Western allies have been urging OPEC+ (Organization of the Petroleum Exporting Countries and its allies) to increase oil output to secure lower energy costs. However, OPEC+ members said they will continue to cut supplies to maintain stability in market.

The EIA (Energy Information Administration) said that US oil output from top shale-producing regions could decline for a third straight month in October.

On the demand front, investors continue to assess the state in the Chinese economy, as the Asian nation is the world’s largest oil importer. The country’s industrial output and consumer spending showed some signs of recovery last month but continue to be under pressure.

WTI crude oil for October delivery gained 71 cents to close at $91.48 per barrel on Monday, while Brent crude for November delivery rose 50 cents to $94.43 per barrel, after surging to as high as $94.45 earlier in the session.

In other energy trading, wholesale gasoline for October delivery declined 1 cent to $2.70 a gallon, while October heating oil slipped 9 cents to $3.29 a gallon and October natural gas added 9 cents to $2.73 per 1,000 cubic feet on Monday.

What to watch: Traders will watch comments from leading market agencies regarding oil prices. On Monday, Citi said it expects Brent prices to surpass $100 per barrel this year.

The interest rate decision by major central banks will remain in focus, with the US Federal Reserve and Bank of England set to announce their decisions this week. The American Petroleum Institute will also release data on crude oil stockpiles today. Stockpiles of crude in the US had risen by 1.174 million barrels in the week ended September 8, following a decline of 5.521 million barrels in the prior week.

The markets today

European stocks will be in focus today ahead of a couple of major economic reports.

Context: European stock markets settled sharply lower on Monday, with investors keeping an eye on several global central bank decisions.

Details: Last week, the European Central Bank raised its benchmark interest rate by 25 basis points, announcing its 10th rate hike in a row, to send its main rate to a record high of 4%. Investors continue to watch inflation and growth expectations, which could impact the ECB’s upcoming rate decisions.

The US Federal Reserve is gearing up to announce its interest rate decision on Wednesday, with markets widely expecting the central bank to keep rates unchanged.

Australia’s central bank is also scheduled to release the minutes from its meeting on Tuesday, while the Swiss National Bank will announce its rate decision on Thursday. Markets await updates from the People’s Bank of China and the Bank of Japan.

On the corporate front, Nordic Semiconductor ASA shares dipped around 10% on Monday after the company revised lower its revenue forecast for the third quarter. Shares of S4 Capital fell around 22% after reducing its annual outlook.

The STOXX Europe 600 Index declined 1.13% to close at 456.72 on Monday, with all sectors closing in the negative zone. Healthcare, banks and travel stocks were among the worst performers.

Germany’s DAX 40 declined by 1.05% to 15,727.12, while France’s CAC 40 lost 1.39% to settle at 7,276.14. London’s FTSE 100 index fell by 0.76% to close at 7,652.94 on Monday, reversing last week’s rally.

What to watch: Investors await the release of economic reports on current account and inflation rate from the Eurozone today. The Eurozone, which posted a current account surplus of €36.8 billion in June, is projected record a €28.0 billion surplus in July. Analysts expect the Eurozone’s annual inflation rate to remain steady at 5.3% in August.

Other Markets: US trading indices closed slightly higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.02%, 0.07% and 0.15%, respectively.

The news shaping the markets

Russia’s Foreign Minister Sergey Lavrov said that the US was controlling the ongoing war in Ukraine. Despite the ongoing geopolitical tensions, the safe-haven US dollar index slightly lower this morning.


Colombia’s leading economic indicator rose by 1.18% year-over-year in July, extending the growth trend and lending support to the COP/USD forex pair.


Canada’s housing starts declined by 1% to 252,787 units in August. The figure coming in better than market expectations of 247,100 units sent the CAD/USD pair higher this morning.


Minutes of the Reserve Bank of Australia’s latest meeting showed that policymakers may be considering a further rate hike of 25 basis points in September. The news lent support to the AUD/USD forex pair.


US NAHB/Wells Fargo Housing Market Index fell for a second month to a reading of 45 in September. However, the Dow Jones index closed slightly higher on Monday.

What else to watch today

Italy’s current account, Brazil’s IBC-Br economic activity index, Canada’s inflation rate, US building permits, housing starts and Redbook index, South Africa’s SACCI business confidence index, as well as Argentina’s gross domestic product.


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