Oil adds to recent gains on supply fears

Oil prices rose more than $1 on Wednesday as markets focused on tight supply heading into the northern hemisphere winter and a “soft landing” for the US economy.

Brent crude futures broached $95, up $1.14 to $95.10 a barrel by 11.12am GMT. West Texas Intermediate crude climbed $1.35 to $91.74.

Markets continued to worry about US crude stockpiles at the key storage hub in Cushing, Oklahoma, falling below minimum operating levels.

That dip at Cushing, the delivery point for US crude futures, would compound supply tightness stemming from cuts by Opec and allies, helping to fuel the current crude price gains.

Those concerns come despite industry data on Tuesday showing US crude oil stockpiles rose by about 1.6-million barrels last week compared with analysts’ expectations of a roughly 300,000-barrel drop.

“Oil prices are overall relatively strong amid the current tightening of supply,” said CMC Markets analyst Leon Li. “Economic data from countries in Europe and the US have recently weakened … Oil prices in October may show a volatile trend as a whole. It is unlikely to exceed $100 in the short term, but it is expected to be strong.”

US government data on oil inventories is expected at 2.30pm GMT.

Russia last week imposed a temporary ban on petrol and diesel exports to most countries to stabilise the domestic market, and though it later softened restrictions, they could put upward pressure on crude oil demand from refineries.

Meanwhile, a “soft landing” for the US economy is more likely than not, Minneapolis Federal Reserve Bank President Neel Kashkari said on Tuesday, but there is also a 40% chance that the Fed will need to raise interest rates “meaningfully” to beat inflation.

The Bank of England has concluded its tightening cycle and is likely to keep its benchmark at 5.25% until at least July, according to a survey of economists, though a minority said it would hike rates again this year.

Higher interest rates increase borrowing costs, which could slow economic growth and reduce oil demand.

Reuters