Oil prices rise as Russia bans fuel exports

September 22, 2023 (MLN): Oil prices rose on Friday despite the U.S. Fed's hawkish stance as the market weighed supply concerns arising from Russia's ban on fuel exports.

Brent crude is currently trading at $92.84 per barrel, up by 0.67% on the day.

While West Texas Intermediate crude (WTI) is trading at $89.92 per barrel, up by 0.73% on the day.

To note, oil prices are currently on track to break their three-week streak of continuous gains.

As of now, both the benchmarks are down by 0.80% this week.

"Trading remained choppy amid a tug-of-war between supply fears that were reinforced by a Russian ban on fuel exports and worries over slower demand due to tighter monetary policies in the United States and Europe," said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, as Reuters reported.

"Going forward, investors will focus on whether the OPEC+ production cuts are being implemented as promised and whether the rise in interest rates will reduce demand," he said, predicting WTI to trade in a range of around $90-$95.

Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect to stabilize the domestic fuel market, the government said on Thursday.

The shortfall, which will force Russia's fuel buyers to shop elsewhere, caused heating oil futures to rise by nearly 5% on Thursday.

"Crude oil bounced off a session low after Russia banned diesel exports, which included gasoline. The action reversed a downside movement in crude markets following the hawkish Fed decision on Thursday," said Tina Teng, an analyst at CMC Markets, in a note.

"However, mounting fears of a recession in the Eurozone could continue pressuring oil prices," she added.

The Bank of England (BoE) on Thursday decided to leave its key interest rate unchanged at 5.25%.

Notably, this comes after the central bank raised its interest rates for the past 14 consecutive meetings, taking the interest rates from 0% in December 2021 to 5.25% in August, pushing borrowing costs to their highest level since the 2008 financial crisis.

The U.S. Federal Reserve on Wednesday decided to leave interest rates unchanged at 5.25%-5.5%, but stiffened its hawkish stance, projecting a quarter-percentage-point increase to 5.50-5.75% by year-end.

That buoyed fears that higher rates could dampen economic growth and fuel demand while boosting the U.S. dollar to its highest since early March, making oil and other commodities more expensive for buyers using other currencies.

A European Central Bank (ECB) governing council member said the central bank will most likely keep interest rates stable at its next policy meeting.

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