October 20, 2022 [Quantum Commodity Intelligence] – Quantum Commodity Intelligence – Crude oil futures retreated Monday from the five-week highs posted in the previous session in a late selloff, having spent most of the session largely consolidating last week’s gains of over 15%.
Front-month December ICE Brent futures were trading at $95.85/b (1930 GMT), compared to Friday’s settle of $97.92/b.
At the same time, Nov22 NYMEX WTI was trading $90.80/b versus Friday’s settle of $92.64/b.
A wave selling came in as recessionary fears were again raised as US Federal Reserve Chicago President Charles Evans said there was a strong consensus at the Fed to increase the target for interest rates to around 4.5% by next March.
Markets had been well supported for most of the session after last week’s decision by OPEC+ to cut output by a headline 2 million barrels per day, which analysts say will reduce actual output b around 1 million bpd.
“OPEC+ showed their cards and that will keep oil markets very tight as we approach winter. OPEC+ has done whatever it takes and is now awaiting to see what the reaction will be from world leaders. The risks of $100 oil are easily back on the table and if it is a cold winter, we could see $110 before the end of the year,” said Ed Moya, senior market analyst at brokerage Oanda.
Analysts flagged a rise in geopolitical tensions after multiple explosions hit the centre of Ukraine’s capital Kyiv on Monday, further strengthening western resolve to sanction Russian oil. This is the first time Ukraine’s capital had been hit since late June.
Local media reported explosions in other cities, including Lviv, Dnipro and Zaporizhzhia overnight. Energy infrastructure has been struck in the Lviv region in Western Ukraine, a local military official said.
Oil markets also held up after the US jobs data report showed the labour market remains strong but is showing signs of cooling, although a strong dollar was seen capping further steep gains for oil.
Meanwhile, North American drilling activity dipped for the first time in nearly a month for the week ending 7 October, oilfield services firm Baker Hughes reported.
The total weekly rig count was down by three units to 762, although the count is still 229 more than the 533 counted at the same time in 2021.