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WTI Posts Strongest One-Day Gain in a Month on Bullish US Inventories, Russia Output Worries

By:
Joel Frank
Published: Aug 18, 2022, 19:02 UTC

WTI gained over $3.0 on Thursday to move back above the $90 per barrel mark.

Oil

In this article:

Key Points

  • WTI rallied over $3.0 on Thursday, its best day in a month, after Wednesday’s bullish US inventory report.
  • Russian output concerns were also cited as supporting prices.
  • Copper rose despite the strong US dollar, with traders instead focused on positive China fundamentals.

WTI Gains on Bullish US Inventories, Renewed Russian Output Concerns

Front-month futures of the US benchmark for sweet light crude oil, West Texas Intermediary or WTI, jumped over $3.0 on Thursday, the best absolute one-day gain in one month, with prices recovering back above the $90 level after hitting six-month lows under $86 earlier this week.

Market commentators cited a few factors as boosting prices on Thursday, including Wednesday’s bullish US crude oil inventory report and renewed concerns about the outlook for Russian oil production later this year. While a Reuters report citing Russian government documents suggesting the country plans to increase output all the way through to 2025 amid strong demand from Asian customers, analysts on Thursday said that Russian exports could yet dip further in the near-term as the EU toughens sanctions.

The EU is set to ban seaborne crude oil/product imports from Russia in the next few months, which consultancy BCA Research said will result in a shuttering of 1.6 million barrels per day in Russian output. BCA said they expect this to rise to 2 million by the end of next year and said they think this could help lift Brent, currently trading around $95 per barrel, towards $120 by the year’s end.

Commentary from OPEC’s Secretary General Al Ghais was also cited as boosting oil prices, after he hinted that output cuts were on the table for the upcoming early September OPEC+ meeting. Al Ghais said fears about a slowdown in Chinese demand had been “taken out of proportion”. Elsewhere in the energy complex, US natural gas prices remained close to annual highs above $9.0, supported by a rise to fresh record highs over in Europe.

Copper Rises on Positive China Fundamentals, Gold Traders Monitor Strong US Data/Hawkish Fed Rhetoric

Despite a sharp rise in the US dollar on Thursday, copper prices rose nearly 1.5% to back above $3.60. Dollar appreciation tends to weigh on USD-denominated copper prices as it makes it more expensive for international buyers. Market commentators cited positive fundamental developments in copper’s largest market China as supporting prices.

They pointed to Chinese copper inventories that are running low, import premiums that continue to rise and recent moves by the Chinese central bank/fiscal policymakers to support growth as supporting sentiment.

Over in the precious metals complex, gold prices were a tad lower on the day but still above $1,750, weighed amid the stronger dollar, but with downside cushioned by lower US yields. Gold traders were on Thursday monitoring stronger than expected US weekly jobless claims and Philadelphia Fed manufacturing survey data as well as hawkish commentary from a few Fed policymakers. Price action was ultimately indecisive.

About the Author

Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018. Joel specialises in the coverage of FX, equity, bond, commodity and crypto markets from both a fundamental and technical perspective.

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