LONDON: Oil prices rebounded from $1 down to $1 up in trading on Thursday, after a Russian ban on fuel exports snapped focus away from Western economic headwinds and back to throttled crude supply to the end of 2023.
Brent futures for November delivery were up $1.02, or 1.09%, to $94.55 a barrel by 1348 GMT. U.S. West Texas Intermediate crude (WTI) climbed $1.27, or 1.42%, to $90.93, the lowest since Sept. 14. Both benchmarks had fallen more than $1 earlier on Thursday.
Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect in order to stabilise the domestic fuel market, the government said on Thursday.
The shortfall will mean that Russia’s fuel buyers will have to shop elsewhere, prompting refiners to process more of a dwindling crude supply to meet that demand, said Tamas Varga of oil broker PVM.
“The Russian news came out and tension from the longer-term outlook immediately shifted back to supply,” said Vargas, referencing the U.S. Federal Reserve’s hawkish signals.
The Fed on Wednesday maintained interest rates, but stiffened its hawkish stance, projecting a quarter-percentage-point increase to 5.50-5.75% by year-end.
That may dampen economic growth and overall fuel demand, and led to the U.S. dollar surging to its highest since early March, making oil and other commodities more expensive for buyers using other currencies.
Central banks’ moves elsewhere also signalled potential pressure on oil prices. The Bank of England mirrored the Fed and held interest rates on Thursday after a long run of hikes, but said it was not taking a recent fall in inflation for granted.
Meanwhile, Norway’s central bank raised its benchmark interest rate on Thursday and, in a surprise move, said it would probably hike again in December. Earlier price falls were limited by continuous concern on tight supply globally entering the fourth quarter, with crude stocks at Cushing - the WTI delivery hub - at their lowest since July 2022 and production cuts continuing by the Organization of the Petroleum Exporting Countries and allies.