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Oil rises for a second day on supply tightness concerns

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2 years ago

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  • Russia’s Gazprom tightens squeeze on gas flow to Europe.
  • Fed expected to hike rates 75 bps on Wednesday.
  • Brent premium to US crude hits widest in three years.

LONDON: Oil prices rose on Tuesday for a second day on increasing concerns about tightening European supply after Russia, a key energy supplier to the region, cut gas supply through a major pipeline.

Brent crude futures rose $1.14, or 1.1%, to $106.29 a barrel by 1029 GMT, extending a 1.9% gain the previous day.

US West Texas Intermediate (WTI) crude futures increased $1.31, or 1.4%, to $98.01 a barrel, having gained 2.1% on Monday.

Russia tightened its gas squeeze on Europe on Monday as Gazprom said supplies through the Nord Stream 1 pipeline to Germany would drop to just 20% of capacity. 

The cut in supplies will leave countries unable to meet their goals to refill natural gas storage ahead of the winter demand period. Germany, Europe’s biggest economy, faces potentially rationing gas to industry to keep its citizens warm during the winter months. 

“The announcement revived fears that Russia, despite its cynical denial, will not shy away from using its energy as a weapon in order to gain concessions in its war against Ukraine and…could probably expect short-term success,” Tamas Varga from oil brokerage PVM said.

The European Union has repeatedly accused Russia of resorting to energy blackmail, while the Kremlin says shortfalls have been caused by maintenance issues and the effect of Western sanctions.

On Tuesday, EU countries agreed on an emergency regulation to curb their gas use this winter. 

Europe’s crude, oil product and gas supplies have been disrupted by a combination of Western sanctions and payment disputes with Russia since its Feb. 24 invasion of Ukraine, which Moscow calls a “special military operation.”

Still, falling demand because of recent high crude and fuel prices and the expectation of an increase in interest rates in the United States have put pressure on prices.

The US central bank is widely expected to raise interest rates by 75 basis points at the conclusion of its policy meeting on Wednesday. That increase may reduce economic activity and thus impact fuel demand growth. 

Morgan Stanley said that 77% of global central banks have hiked rates in the last six months, with that percentage reaching a 40-year high, and “making this the most-synchronised cycle of rate hikes since the early 1980s”.

The bank lowered its demand growth forecasts for this year and next. It forecasts Brent crude prices at $110 a barrel in the third quarter and WTI at $107.50, each $20 lower than their previous forecast.

The gap between European and international oil benchmark Brent and US benchmark WTI has widened to levels not seen since June 2019 as easing gasoline demand in the United States weighs on US crude while tight supply supports Brent. 

Prompt Brent inter-month spreads reached $5 a barrel on Tuesday, their highest level in three weeks. In a backwardated market, front-month prices are higher than those in future months.

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Pakistan’s gold prices are still declining; see the most recent

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6 days ago

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The price of 10-gram gold reduced by Rs943 to settle at Rs207,733, while the price of gold dropped by Rs1200 to close at Rs242,300 a tola, according to the Sindh Sarafa Jewellers Association.

In the global market, the price of the precious metal fell by $10 to $2,349 per ounce, resulting in losses.

At 04:48 GMT, the spot price of gold had dropped by 0.2% to $2,354.77 per ounce. In the previous session, prices reached a two-week high.

American gold futures dropped 0.6% to $2,361.

Spot silver decreased by 0.4% to $28.03 per ounce, while palladium remained steady at $978.03 and platinum decreased by 0.1% to $992.89.

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Pakistan and the IMF begin talks for a new loan.

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6 days ago

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Pakistan is requesting a $6 to $8 billion bailout package from the international lender over the next three to four years to address its financial troubles.

A mission team led by Nathan Porter, the IMF’s Mission Chief in Pakistan, is meeting with a Pakistani delegation led by Finance Minister Muhammad Aurangzeb.

According to sources familiar with the situation, Islamabad may face more difficult options, such as raising power and gas bills.

Mr. Aurganzeb informed the IMF team that the country’s economy has improved as a result of the IMF loan package, and Islamabad is ready to sign a new loan programme to further develop.

The IMF mission expressed satisfaction with Islamabad’s efforts to revive the country’s struggling economy.

The IMF praised Pakistan’s economic growth in its staff report earlier this week, but warned that the outlook remains challenging, with very high downside risks.

The country nearly avoided collapse last summer, and its $350 billion economy has stabilized since the end of the last IMF program, with inflation falling to roughly 17% in April from a record high of 38% last May.

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Petrol prices are likely to drop significantly beginning May 16.

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6 days ago

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According to sources, the government is set to decrease petrol prices by Rs 14 per litre and diesel prices by Rs 10 on May 16 for the next fortnight’s revision.

Last month, the government reduced the price of fuel and high-speed diesel by Rs5.45 and Rs8.42 per fortnight, respectively.

The current fuel price is Rs288.49 per litre, while the HSD price is Rs281.96.

Meanwhile, oil prices fell further on Monday, as signs of sluggish fuel consumption and comments from U.S. Federal Reserve officials dimmed optimism for interest rate reduction, which may slow growth and reduce fuel demand in the world’s largest economy.

Brent crude prices down 25 cents, or 0.3%, to $82.54 a barrel, while US West Texas Intermediate crude futures fell 19 cents, or 0.2%, to $78.07 per barrel.

Oil prices also declined on signals of poor demand, according to ANZ analysts, as gasoline and distillate inventories in the United States increased in the week before the start of the driving season.

Refiners throughout the world are dealing with falling diesel profitability as new refineries increase supply and warm weather in the northern hemisphere and weak economic activity reduce demand.

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