As supply concerns rise, oil prices increase in early trade

22 Sep 2023 , 10:19 AM

Oil prices saw an increase on Friday as concerns about a Russian embargo on gasoline exports, potentially limiting the global oil supply, outweighed fears of potential future U.S. interest rate hikes impacting fuel consumption. However, oil prices were still on track to register their fourth consecutive weekly decline.

Brent futures rose by 21 cents, or 0.2%, reaching $93.51 per barrel, while WTI futures increased by 23 cents, or 0.3%, reaching $89.86.

Both benchmarks were set for a slight weekly dip, following a more than 10% rise in the previous three weeks due to concerns about a global oil shortage as OPEC+ continued to curtail production.

Russia recently announced a temporary restriction on gasoline and diesel exports to countries outside a group of four former Soviet states in an effort to stabilize the domestic fuel market. This move led to a roughly 5% increase in heating oil futures on Thursday.

On Wednesday, the U.S. Federal Reserve decided to keep interest rates unchanged but adopted a more hawkish stance by forecasting a potential 0.25 percentage point increase to a range of 5.50–5.75% by the end of the year. This caused the U.S. dollar to reach its highest level since early March, making oil and other commodities more expensive for consumers using foreign currencies. Concerns arose that higher rates could hinder economic growth and fuel demand.

Following the Fed’s decision, the Bank of England also opted to keep interest rates steady on Thursday but noted that it was not taking the recent decline in inflation for granted, indicating a watchful stance.

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