DTN Oil Update
Oil Up 2% as US Government Reopen Nears, Russia Sanctions Bite
SECAUCUS, N.J. (DTN) -- Crude futures rose 2% Tuesday, Nov. 11, buoyed by an imminent reopening of the U.S. federal government from a record-long shutdown and as Western sanctions on Russian supply forced cargo cancellations.
The NYMEX WTI crude contract for December delivery settled up $0.91 at $61.04 bbl. ICE Brent crude for January delivery finished up $1.10 at $65.16 bbl.
Downstream, December RBOB gasoline futures closed up $0.0409 at $2.012 gallon, while front-month ULSD futures ended up $0.0653 to $2.5757 gallon.
The U.S. Dollar Index softened by 0.197 points to 99.265 against a basket of foreign currencies.
The U.S. House of Representatives was set to reconvene Wednesday, Nov. 12, to vote on a Senate bill passed late Monday, Nov. 10, to reopen the federal government after a 41-day shutdown.
The market focused on the immediate relief a government reopening will provide the U.S. economy and the impact of Western sanctions on Russian oil, despite the global oversupply in crude.
The shutdown delayed the release of important U.S. macroeconomic indicators -- whose absence has complicated deliberations on monetary policy by the Federal Reserve.
It also disrupted the lives of ordinary Americans. Issuance of food stamps that millions relied on were halted. Thousands of flights were delayed and canceled as air traffic controllers filed for retirement at record rates or reported sick when told to work without pay.
Even with the impending government reopen, the aviation crisis could take time to resolve, with the Federal Aviation Administration mandating a 4% reduction in flights beginning this Friday and culminating in a 10% cut a week later.
On the Russian supply front, Lukoil declared force majeure at the 480,000-bpd West Qurna 2 oil field in the wake of Western sanctions, leading to immediate cargo cancellations. Though West Qurna 2's production is minor by global standards, the disruption injected fresh geopolitical risk into oil markets.
Sanctions have also stopped five Indian refiners from buying Russian crude for December, Bloomberg reported. The five -- Bharat Petroleum, Hindustan Petroleum, Mangalore Refinery and Petrochemicals, Reliance Industries and Mittal Energy -- typically account for two-thirds of India's Russian crude imports.
Ukraine has, meanwhile, intensified drone strikes on Russian oil infrastructure, reportedly hitting six refineries over the past three weeks that account for roughly 20% of Russia's refining capacity.
It is also a data-heavy week for oil markets. The International Energy Agency publishes its World Energy Outlook on Wednesday and the November Oil Market Report on Thursday. The U.S. Energy Information Administration's Short-Term Energy Outlook for November and the Organization of Petroleum Exporting Countries monthly oil market report are both due Wednesday.