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Oil Extends Drop From 7-Year High as Energy Crunch Fear...

Business Maverick

Business Maverick

Oil Extends Drop From 7-Year High as Energy Crunch Fears Ease

A gas flare burns from a torch column at the Grupa Lotos SA oil refinery in Gdansk, Poland, on Tuesday, July 28, 2020. Polish refiner PKN Orlen won conditional European Union approval to buy rival Lotos after agreeing on a extensive commitments package designed to allay potential competition concerns. Photographer: Bartek Sadowski/Bloomberg
By Bloomberg
07 Oct 2021 0

Oil extended losses in Asian trading after U.S. crude stockpiles grew more than expected and Russia offered to ease a natural gas crisis.

Futures in New York dropped below $77 a barrel after retreating almost 2% on Wednesday. U.S. crude inventories expanded by 2.35 million barrels last week, according to government figures, more than double the median estimate in a Bloomberg survey. Russian President Vladimir Putin said record volumes of natural gas could potentially be exported to Europe this year as the continent faces an energy crunch. Gas prices fell after his remarks.

See also: Gas-to-Oil Switching: A Trend to Shape Winter Crude Prices

At least one technical indicator signaled oil was poised for a pullback after a sizzling start to the week. West Texas Intermediate’s 14-day Relative Strength Index jumped above 70 on Monday, a level that signals crude is overbought.

U.S. crude inventories increase for a second week

Oil rallied to the highest since 2014 this week as an energy crunch from Europe to Asia raised the prospect of greater demand for crude and oil products ahead of winter, while OPEC+ said it would restore only a relatively modest amount of supply to the market in November as planned. Saudi Aramco said the gas crisis has already boosted consumption, while the Financial Times reported the U.S. is considering the release of emergency oil reserves.

“High energy prices are mostly centered around supply-side issues and they do not look like they will persist beyond winter,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “Where prices are at right now, I think they look reasonable, but I still have my doubts about $100 oil.”

  • WTI for November delivery fell 0.9% to $76.74 a barrel on the New York Mercantile Exchange at 11:01 a.m. in Singapore after falling 1.9% on Wednesday.
  • Brent for December settlement slipped 0.5% to $80.67 on the ICE Futures Europe exchange after losing 1.8% on Wednesday.
  • The prompt timespread for Brent was 69 cents in backwardation, compared with 78 cents at the start of the week.

U.S. gasoline stockpiles rose by around 3.3 million barrels last week, while distillate inventories slipped by 396,000 barrels, according to data from the Energy Information Administration. Crude supplies at the key storage hub in Cushing, Oklahoma, expanded for a second week.

Exports from Russia’s Gazprom PJSC to Europe in the first nine months of the year were close to all-time highs, according to the company. If that pace is sustained for the rest of 2021, it would be a record year, Putin said at a televised meeting on Wednesday.

Other market news:
  • It is “only a matter of time” before OPEC+ accelerates supply increases, especially if oil remains over $80 a barrel, according to Citigroup Inc.
  • Allies of the oil and coal industry have seized on energy crises overseas and rising gasoline prices in the U.S. to counter President Joe Biden’s plans to combat climate change and force a rapid shift to renewable power.
  • U.S. shale oil production will expand at a “modest rate” over the next 18 months even as prices touch multi-year highs, according to BloombergNEF, leaving OPEC in a powerful position as the world cries out for more barrels.

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