Weak dollar, big US crude exports stimulate oil markets

  • Dollar soft, boosts commodities
  • US exports hit record high – EIA
  • Increase in US exports due to widening WTI-Brent gap

NEW YORK, October 26 (Reuters) – Oil prices rose nearly 3% on Wednesday, supported by record US crude exports and the country’s refiners operating at higher-than-normal levels for this time of year.

Dollar weakness added support, as the dollar’s recent strength has been a notable factor holding back oil market gains.

Brent crude futures were up $2.17, or 2.3%, to settle at $95.69 per barrel. US West Texas Intermediate (WTI) crude rose $2.59, or 3%, to $87.91.

The US dollar makes oil cheaper for holders of other currencies. The US dollar was stronger than other major foreign currencies as the US Federal Reserve was more aggressive in raising rates.

“Overall, this is a dollar-denominated move, and if you try to read it out of it, it’s silly,” said Eli Tesfaye, senior market strategist at RJO Futures.

U.S. crude inventories were more than expected, up 2.6 million barrels last week, according to weekly government data, but that was lower than industry figures, which showed an increase of 4.5 million barrels.

Crude oil exports rose to 5.1 million barrels per day, bringing US crude imports to the lowest level in history, from the highest level ever.

“Overall, thanks to the export market, this translates into a bullish report despite a moderate increase in commercial crude inventories,” said John Kilduff, partner at Again Capital in New York.

Traders attributed the increase in exports to the widening WTI-Brent spread, which was more than $8 a barrel in Wednesday’s trade.

US refinery rates have held steady at around 89% of capacity, the highest for this time of year since 2018.

The Organization of the Petroleum Exporting Countries surprised markets with a larger-than-expected cut in production targets earlier this month. Following this move, oil analysts said supply will tighten in the coming months, as Europe is expected to ban oil imports from Russia next month and restrict Russian shippers from the global shipping insurance industry.

This ban could tighten world shipping markets, which could increase the price of oil. Many analysts believe that Russia can circumvent the measures, but it may still cause Moscow to cease production of 1 million to 2 million bpd; It could also hit distillate markets.

“We believe that by 2024, oil prices will be strongly affected by the availability of tankers willing to transport Russian oil rather than global supply-demand fundamentals, keeping the price of oil high,” JP Morgan analysts said.

Reporting by David Gaffen; Additional reports by Laura Sanicola, Shadia Nasralla and Rowena Edwards; Edit: Marguerita Choy and Cynthia Osterman

Our Standards: Thomson Reuters Trust Principles.

David Gaffen

Thomson Reuters

David Gaffen leads a team that writes and reports on oil and gas in North America; previously worked for The Wall Street Journal and TheStreet.com

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