On Thursday, oil prices staged a recovery, bouncing back from a $1 decline to a $1 gain in response to Russia’s decision to halt fuel exports. This move shifted attention away from Western economic challenges and refocused it on constrained crude oil supplies expected until the end of 2023,Energy News Africa reports.
By 1348 GMT, Brent futures for November delivery had risen by $1.02, or 1.09%, reaching $94.55 per barrel. U.S. West Texas Intermediate crude (WTI) also saw an increase of $1.27, or 1.42%, reaching $90.93, following an earlier drop to their lowest level since September 14. Both benchmark prices had experienced declines of over $1 earlier in the same Thursday session.
Russia implemented a temporary ban on gasoline and diesel exports to all countries except for four ex-Soviet states, effective immediately. This decision aimed to stabilize the domestic fuel market, as announced by the government on Thursday.
As a result of this shortfall, Russian fuel buyers will need to seek alternative sources, prompting refineries to process more of the diminishing crude oil supply to meet this increased demand, according to Tamas Varga, an oil broker at PVM.
“The Russian news came out, and the focus immediately shifted back to supply concerns,” noted Vargas, alluding to the U.S. Federal Reserve’s hawkish signals.
On the previous day, the Federal Reserve maintained its interest rates but adopted a more hawkish stance, projecting a quarter-percentage-point increase to a range of 5.50-5.75% by year-end. This move could potentially dampen economic growth and overall fuel demand, leading to a surge in the U.S. dollar to its highest level since early March. Consequently, oil and other commodities became more expensive for buyers using different currencies.
Central banks’ actions elsewhere also hinted at potential pressure on oil prices. The Bank of England, following a series of rate hikes, decided to keep interest rates unchanged on Thursday but expressed caution regarding recent declines in inflation. Meanwhile, Norway’s central bank surprised by raising its benchmark interest rate and indicating the likelihood of another hike in December.
Earlier price declines were offset by ongoing concerns about tight global supply as the fourth quarter approached. Crude stocks at Cushing, the WTI delivery hub, were at their lowest level since July 2022, and production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies continued to impact the market.