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International oil prices rebound, European energy security adds new chaos, but bulls face a big tie Provider FX678

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International oil prices rebound, European energy security adds new chaos, but bulls face a big tie Provider FX678
International oil prices rebound, European energy security adds new chaos, but bulls face a big tie

On Wednesday (October 12), international oil prices rebounded, supported by supply concerns caused by production cuts by the Organization of the Petroleum Exporting Countries and its partners (OPEC+), and the oil pipeline leak between Russia and Europe further increased supply uncertainty. But the deteriorating global economic outlook limited the upward pace of oil prices.

At 16:42 Beijing time, NYMEX crude oil futures rose 0.10% to US$89.44/barrel; ICE Brent crude oil futures rose 0.20% to US$94.48/barrel.

Sugandha Sachdeva, vice president of commodities and currencies at Religare Broking, said: “Crude prices will gain further upward momentum after a brief pullback, with Brent likely to rise to as much as 10 per barrel amid tight supply from OPEC+ cuts and disruptions to Russian oil production. At $104, NYMEX crude oil futures were trading at $98 a barrel.”

Citi Research expects NYMEX crude to average $96 a barrel in 2022 and Brent to average $101 a barrel due to tight supply due to production cuts. The agency also said: “While the OPEC+ cuts look large on paper, the actual cuts will be smaller. We expect the final cuts to be less than 900,000 bpd, in part due to poor Iraqi compliance.”

Polish operator PRN said on Wednesday it found a leak in the Druzhba pipeline that transports oil from Russia to Europe, saying it may have been caused by an accident. But the incident could still raise concerns about the security of Europe’s energy supply.

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Druzhba, which means “friendship” in Russian, is one of the largest oil pipelines in the world through which Russian oil flows to most of Central Europe, including Poland, Germany, Hungary, Slovakia, the Czech Republic and Austria.

Under EU sanctions on Russia, the German government aims to stop oil imports from Russia by the end of the year. But in the first seven months of the year, Russia remained its largest energy supplier, accounting for more than 30 percent of Germany’s oil imports.

At the same time, aggressive interest rate hikes by the Federal Reserve are expected to continue to support a stronger dollar, making dollar-denominated commodities more expensive for holders of other currencies and tending to weigh on oil and other risky assets. Also on the downside, the International Monetary Fund overnight downgraded its global growth forecast for 2023 and warned of an increased risk of a global recession.

Stephen Innes, managing partner at SPI Asset Management, said in a note: “While fundamentals point to higher oil prices and OPEC+ production cuts, high inflation and even a dismal U.S. earnings season could negatively impact the oil market.”

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