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Oil pares gains ahead of Fed Reserve comments

by Jessica Weisman-Pitts
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2023 10 02T010421Z 1 LYNXNPEJ9100O RTROPTP 4 GLOBAL OIL KEMP

Oil pares gains ahead of Fed Reserve comments

By Paul Carsten

LONDON (Reuters) – Oil prices pared gains after earlier climbing $1 on Monday, with questions around supply and global demand and ahead of comments from the U.S. Federal Reserve chair that could offer insight on future interest rate moves.

Brent December crude futures were up 36 cents to $92.56 a barrel by 1313 GMT, after earlier climbing more than $1. Brent November futures had settled 7 cents lower at $95.31 a barrel at the contract’s expiry on Friday.

U.S. West Texas Intermediate crude futures were largely steady, up just 12 cents to $90.91 a barrel, after also jumping more than a $1 in earlier trading, and after losing 92 cents on Friday.

Both benchmarks rallied nearly 30% in the third quarter on forecasts of a wide crude supply deficit in the fourth quarter after Saudi Arabia and Russia extended additional supply cuts to the end of the year.

Investors were waiting on Monday for comments from Federal Reserve Chair Jerome Powell to gauge the central bank’s interest-rate path. Hikes to tame inflation can slow economic growth and reduce oil demand.

The Organization of the Petroleum Exporting Countries with Russia and other allies, or OPEC+, is unlikely to tweak its current oil output policy at a key meeting on Wednesday, four OPEC+ sources told Reuters.

“Oil prices started the week on a strong note amid supply concerns with no policy change by OPEC+ expected, while the avoidance of a U.S. government shutdown over the weekend gave some relief,” said Hiroyuki Kikukawa, president of NS Trading.

Speaking at an event on Monday, OPEC Secretary General Haitham Al Ghais said the group still sees “oil demand as quite resilient this year, as it was last year.”

A Reuters survey on Monday showed OPEC oil output rose for a second straight month in September, led by increases in Nigeria and Iran despite cuts by Saudi Arabia.

Pumping more crude supply into the system, Turkey will restart operations this week on a pipeline from Iraq that has been suspended for about six months, Turkey’s energy minister said on Monday

Additionally, Saudi Arabia could start to ease its additional voluntary supply cut of 1 million barrels per day (bpd), said ING analysts in a note on Monday.

“The Saudis have said that there is still concern over Chinese demand. However, PMI data out over the weekend will provide some confidence.”

Official data on Saturday showed that China’s factory activity expanded for the first time in six months in September, adding to a run of indicators suggesting the world’s second-largest economy has begun to stabilise.

Despite the brighter China news, European manufacturing data showed the euro zone, Germany and Britain all remained mired in a downturn in September – bad news for oil demand.

 

(Reporting by Paul Carsten in London, Yuka Obayashi in Tokyo and Emily Chow; Editing by Kim Coghill, Kirsten Donovan and Sharon Singleton)