ICE Brent Futures at 3yrs High on Global Supply Disruption
9/27 3:35 PM
ICE Brent Futures at 3yrs High on Global Supply Disruptions
WASHINGTON, D.C. (DTN) -- Nearby delivery month oil futures on the New York
Mercantile Exchange and Brent crude traded on the Intercontinental Exchange
rallied as much as 2% on Monday, sending the international crude benchmark to
the highest settlement since October 2018 amid reports that some members of the
Organization of the Petroleum Exporting Countries and Russia-led coalition are
unable to deliver expected production increases in the final months of the
year, while a vaccine-led recovery in global oil demand and power shortages in
China and the European Union are likely to boost winter fuel consumption.
Worrisome headlines out of European Union once again dominated media
airwaves on Monday, suggesting record run in gas prices across the 19-nation
economic bloc could lead to more gas-to-oil switching in power generation.
Russia's Gazprom is unlikely to boost gas deliveries into the European Union
until at least Nov. 1 amid higher-than-expected domestic demand and depleted
inventories, meaning the winter outlook for EU's gas prices is bullish.
Furthermore, panic-buying at petroleum stations in the United Kingdom over the
weekend prompted the government there to suspend The Competition Act of 1998,
in an attempt to ease fuel shortages.
"While there has always been and continues to be plenty of fuel at
refineries and terminals, we are aware that there have been some issues with
supply chains. Therefore, we will enact the Downstream Oil Protocol to ensure
industry can share vital information and work together more effectively to
ensure disruption is minimized," UK Business Secretary Kwasi Kwarteng said.
Upstream, several OPEC+ members last month missed their production quotas
under a joint agreement to raise supplies by 400,000 bpd each month through
December. Delayed maintenance work and underinvestment in new production
capacity undermined crude output in Nigeria, Kazakhstan, and Angola, with all
three members of the coalition pumping at least 250,000 bpd below their August
Together with EU's demand concerns, lower-than-expected production volumes
out of OPEC+ prompted investment bank Goldman Sachs to revise higher their
price outlook for the fourth quarter. Goldman Sachs economists now expect
international benchmark Brent to top $90 bbl for the fourth quarter, up $10 bbl
from the previous outlook.
On the session, NYMEX November West Texas Intermediate futures surged $1.47
or 1.5% to settle at $75.45 bbl, and ICE November Brent advanced $1.44 to a
fresh 35-month high settlement on the spot continuous chart at $79.20 bbl.
NYMEX October ULSD futures gained 2.89cts to settle at a $2.2960 gallon fresh
35-month spot high, and front-month RBOB futures jumped 3.62cts to $2.2237
Monday's higher settlements came even as U.S. dollar index strengthened to
93.381 against a basket of foreign currencies following stronger-than-expected
U.S. industrial data showing durable goods orders unexpectedly increased 1.8%
in August versus an expected 0.6% gain. U.S. Census Bureau said Monday new
orders for transportations equipment once again led the increase with a 5.5%
monthly gain, followed by electrical equipment and appliances, up 1.3% from the
previous month, and computers together with electronic products, up 1.4% on the
month. Manufacturing data in recent weeks showed demand for durable goods
remained resilient this summer even as manufacturers continue to grapple with
shortages in parts and labor. Federal Reserve Bank of Chicago President Charles
Evans said on Monday that most supply-side shortages should be essentially
handled as the year progresses into the fourth quarter.
"We are looking at a very strong economy -- except for labor shortages --
and we're looking for those to work their way out," said Evans.
Also, on Monday Dallas Federal Reserve reported manufacturing activity in
Texas expanded for the 16th consecutive month in September, up three points to
24.2 in September. Categories within the index were mixed, however, with
shipments and capacity utilization expanding in September while the new orders
index fell, although remaining above trend. Inflation, raw material shortages
and delays, workforce challenges, and uncertainty over future tax regime were
highlighted by manufacturers in Texas.
Liubov Georges, 1.646.359.4088, email@example.com, www.dtn.com.
(c) Copyright 2021 DTN, LLC. All rights reserved.