Oil Prices Surge as Refineries Reduce Run Rates
Oil price jumped higher in the global commodities market as refineries around the world began to reduce run rates. Brent crude trades 0.3% higher at $72.93 a barrel, while US benchmark WTI is up 0.5% to $70.44 a barrel.
The market has seen swings in oil price due to imbalanced demand and supply equation in the global commodities market.
There is also sentiment, or rather expectation that US rate cut would reduce energy costs amidst unimpressive Chinese crude demand outlook. Data from China suggest demand would remained depressed in the short term until growth pick up.
With expectation that US Fed would slash rate at the Federal Open Market Committee meeting starting 17 to 18 September, analysts predicted that demand would increase.
Brent settled 1.59% higher yesterday, possibly as shorts in the market cover their positions ahead of Wednesday’s FOMC meeting, ING said in Tuesday note.
Analysts maintained that the global commodities market is still torn between a 25 basis point or 50 basis points cut from the US Fed.
There are also lingering concerns over Libyan oil supply, which continues to be disrupted due to political fighting over the central bank’s control, according to ING.
In addition, in the US, a little more than 12% of US Gulf of Mexico oil production remains shut-in following Hurricane Francine.
Refinery margins around the globe remain under pressure. Unsurprisingly this weakness is leading refiners to reduce their run rates.
In Spain, it is reported that Repsol will be cutting run rates by around 5%. While in Italy, ENI will reportedly reduce run rates by as much as 10% at some of its refineries.
ING commodities strategists said reduction in run rates is obviously not great for crude oil demand. European natural gas prices came under further pressure yesterday.
TTF settled 4.4% lower on the day and finished at its lowest level since late July. Warmer weather weighed on prices.
EU storage continues to tick higher despite reduced flows from Norway, where heavy scheduled maintenance is ongoing.
Undeniably, storage builds have slowed significantly due to these reduced flows, but EU storage still stands at more than 93% full. #Oil Prices Surge as Refineries Reduce Run Rates
