DTN Oil Update
WTI Falls to 2-Week Low on Russian Crude Discounts, Oversupply Fears
SECAUCUS, N.J. (DTN) -- Oil futures hit two-week lows on Tuesday, Dec. 9, amid concerns about mounting Russian crude supplies offered at deeper discounts that could add to the market's oversupply.
The Kremlin's favorable response to a new U.S. national security strategy that called for better relations with Moscow also signaled that Russia did not feel pressured by the Trump administration's bid to find a quick end to the Ukraine war, market participants noted.
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A resolution to the Ukraine conflict is seen as key for the removal of U.S. and European sanctions on Russian oil. Without the sanctions, millions of Russian barrels, now stranded at sea, can make their way legally into global markets, adding to the oversupply in crude. OPEC, or the Organization of the Petroleum Exporting Countries, had already cautioned that the crude market was already in a surplus of 500,000 bpd as of the third quarter.
"From selling Urals at greater discounts and responding with just the right diplomatic touch to U.S. overtures for Ukraine, the Russians are managing the sanctions against them and effectively stalling any quick end to the Ukraine conflict, unless it's on their terms," said John Kilduff, partner at New York energy hedge fund Again Capital.
The average price for Urals crude sold from the port of Novorossiysk in the Black Sea was reported at $38.28 bbl, down by $2.80 bbl from the previous week.
The NYMEX WTI futures contract for January delivery settled down by $0.63 bbl at $58.25 bbl after hitting a two-week low at $58.15.
ICE Brent for February shipments settled down by $0.55 bbl to $61.94 bbl after a two-week low at $61.84.
The front-month RBOB futures contract slid by $0.0033 to $1.7948 gallon.
NYMEX front-month ULSD futures slipped by $0.0337 to $2.2645 gallon.
The U.S. Dollar Index was little changed at 99.21 against a basket of foreign currencies.
The start of a two-day Federal Reserve meeting did little to help the sentiment in energy markets, despite initially limiting their downside Tuesday. The meeting could end Wednesday, Dec. 10, with a third straight interest rate cut of 25 basis points for the year -- a development that typically boosts oil futures, given the sensitivity of the energy component to economic boosting measures.