By Adedapo Adesanya
Oil futures closed higher by 1 per cent on Friday as diesel prices in the US, the world’s largest oil consumer, with the West Texas Intermediate (WTI) increasing by 78 cents or 1.0 per cent to $79.83 per barrel.
Also, Brent moved up by $1.12 or 1.3 per cent to $84.48 per barrel yesterday amid possible disruption in supply after a fire broke out at a refinery in Louisiana.
A fire in a giant naphtha storage tank was contained on Friday afternoon at Marathon Petroleum’s 596,000 barrel-per-day Garyville, Louisiana refinery in the US.
As per Reuters, diesel futures soared about 5 per cent to a near seven-month high, boosting the diesel crack spread, a measure of refining profit margins, to its highest since January 2023.
For the week, Brent declined less than 1 per cent, and WTI lost about 2 per cent. In the previous week, both benchmarks fell by about 2 per cent.
Concerns about global economic health cast a shadow over oil prices.
Weak figures from major economies, including Japan’s shrinking factory activity, declining business activity in the Eurozone, and Britain’s potential economic contraction have heightened demand anxieties.
Even in the US, economic growth seemed to hover near stagnation in August.
The US Dollar rose to an 11-week high against a basket of other currencies after US Federal Reserve Chair Jerome Powell said further interest rate hikes may be needed to fight inflation.
Higher interest rates can slow economic growth and reduce oil demand. A stronger Dollar can also slow demand by making oil more expensive for holders of other currencies.
On the supply side, the possibility of more oil entering the market from Venezuela, Kurdistan, and Iran is easing some concerns. At the same time, Equinor has started production six months early at its extended Statfjord Ost field.
Meanwhile, some analysts have noted that the effect of the Saudi production cuts on international prices has run its course.
China’s disappointing economic recovery, a recovery that was expected to be the driving force behind rising oil demand in the second half of 2023, continues to be bearish for oil.
