Global Supply Risks Rise
Oil prices rise again – Commerzbank
Oil prices began the month on a positive note. Brent crude quickly recovered the losses caused by the contract rollover and broke through the $68 per barrel mark during the day. Due to Labor Day, US markets were closed on Monday, which reduces the significance of yesterday’s price movements. Market participants remain focused on potential supply disruptions from Russia, according to Commerzbank commodity analyst Carsten Fritsch.
The main reasons are tougher US sanctions and mutual attacks by Russia and Ukraine on each other’s energy infrastructure. Data on Russia’s seaborne oil exports, expected to be published by Bloomberg today, will shed light on whether and to what extent these events affected last week’s flows. In the previous week, shipments fell to a four-week low overall, with deliveries to India dropping to their lowest level in nearly three years. A counter-movement is possible.
India appears unwilling to bow to growing pressure from the US government over its purchases of Russian oil. The Indian energy minister defended the purchases in an op-ed in a domestic newspaper, stating that they had stabilized the market and prevented a sharp price surge to as much as $200.
According to informed sources, Russian Urals oil for cargoes loaded in late September and October is being offered at a discount of $3–4 per barrel compared to Brent. By contrast, Indian refineries recently had to pay a $3 premium over Brent for US oil.
Meanwhile, Saudi Arabia and Iraq have stopped supplying oil to an Indian refinery that was placed on the EU sanctions list in July due to its majority Russian ownership. Sources familiar with the matter say the halt is apparently due to payment issues. This refinery, with a capacity of 400,000 barrels per day — nearly 8% of India’s total refining capacity — is now likely to be entirely dependent on Russian imports. However, reports indicate its utilization rate has recently dropped to 70–80% due to the sanctions.