By: Harry Altham, Energy Analyst, Market Analysis EMEA & Asia
Oil prices have been pushed lower this morning, after FOMC members indicated in yesterday’s policy meeting that there would be a prolonged period of elevated interest rates. The fundamentals remain tight across the oil complex itself, with Reuters reporting a 30% cut to Russian middle distillate exports this month (due to reportedly limited domestic inventories) as well as the weakness in Brent causing a retightening of the gasoil crack to $33.30/bbl (a 5% rise). Russian crude stocks are in the 12th percentile of two-year inventory data, and with refinery turnarounds expected in the coming weeks there is an onus to ensure additional diesel stocks at home ahead of seasonal winter demand.
The Federal Reserve kept benchmark interest rates at the 22-year high 5.25%-5.50% range (per expectations), with current interest rate probability forecasts indicating a 69% chance of rates remaining unchanged again at the November meeting. That said, there is ample time for data to impact those ratios, and Fed Chair Jay Powell cited oil prices, strikes in the auto sector and the risk of a Government shutdown as the key drivers in the near term.
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