So, right after the International Energy Agency flagged concerns about declining global oil production rates, we saw prices dip following a decent jump of more than 1.5% in the previous session. The IEA warned that without ongoing investment, global oil supply could decline rapidly, losing the equivalent of Brazil and Norway’s output each year. In fact, nearly 90% of upstream oil and investment is needed just to maintain current supply levels, according to IEA Executive Director Fatih Birol.
This comes as investors are keeping a close eye on the risks to Russian supplies after sources suggested that Ukrainian attacks on Russian oil infrastructure could significantly reduce Russian oil and product exports. Reuters reported that Russia’s oil pipeline monopoly, Transneft, has warned producers they may have to cut output following Ukraine’s drone attacks on critical export ports and refineries, three industry sources said on Tuesday. In a statement on its website, Transneft described the news as “fake” and part of the West’s “information war” against Russia.
Traders are also focused on the upcoming Federal Reserve interest rate decision, as the market awaits to see if the Fed will acknowledge past errors and signal more aggressive rate cuts—or possibly even cut rates by 50 basis points. Though most widely expect only a quarter-point move.
The impact of interest rates on crude oil prices has been significant in the past, and we have already seen weakness in the dollar in anticipation of this meeting.
At the same time, oil prices remain locked in a persistent trading range, with the narrative of constrained supply clashing against tight global diesel inventories and ongoing geopolitical risks that continue to influence the outlook.
Over in Europe, Commission President Ursula von der Leyen shared on X that a 19th round of sanctions for Russia is coming soon, because when it comes to sanctions , the 19th time is the charm. They may even want to retry a new oil price cap because price caps make you feel good, even if they never work. The EU is also signaling that it’s planning to speed up cutting back on Russian fossil fuel imports, which President Trump again urged them to do yesterday as well as over the weekend.
President Donald Trump said that if NATO countries stopped buying Russian oil and imposed 50% to 100% tariffs on China’s purchases of Russian petroleum, the Russia-Ukraine war could end. He criticized NATO for its lack of full commitment and said that buying Russian oil weakens its leverage over Russia.
According to the Centre for Research on Energy and Clean Air (as reported by the AP), since 2023, Turkey has been NATO’s third-largest buyer of Russian oil, after China and India. Other NATO countries involved include Hungary and Slovakia. It remains unclear if these nations could face direct tariffs or bans. The EU offered that it might even target Indian and Chinese companies involved in trading Russian oil.
The American Petroleum Institute did report a big 1.906 build in distillate inventories yesterday, but a 3.420-million-barrel drop in crude oil. We have seen some significant increases in distillate inventories and that seems to reflect the strong refining margin and the fact that the refiners are trying to do what they can to fill a big void as we head into winter. Gasoline inventories were down slightly by 691,000 barrels—not a big surprise—and cushion inventories fell by 379,000 barrels.
We do get the Energy Information Administration report on supplies today, which could move the market if it shows a draw across the board. However, if the EIA reports that diesel inventories are building, it should keep the market rather muted, at least until the Federal Reserve makes its decision and Chairman Jerome Powell speaks.
Natural gas is making a solid case for a seasonal bottom with yesterday’s strong performance and a close above $3 closer to $311. Yet the world is looking at US gas as an answer to their problems.
Reuters reports that JERA, Japan’s largest power generator, is in advanced negotiations to purchase U.S. natural gas assets from GEP Haynesville II for about $1.7 billion, according to sources. JERA reportedly outbid competitors for the assets, which are owned by GeoSouthern Energy (backed by Blackstone) and Williams Companies, after a recent round of offers.
EBW Analytics says that, “storage in the Lower 48 is expected to reach 3,914 Bcf, posing bearish risks for October prices. While near-term pressures remain, forecasts of a cooler October may support medium-term gains. Winter prices will hinge on weather, but rising LNG demand is bullish. High storage levels and more Appalachian supply could limit early winter price increases.
And natural gas traders always must be on storm watch, and the latest developments in the Atlantic are kind of interesting. Fox Weather is reporting that Tropical Depression 7 could become Tropical Storm Gabrielle by Wednesday night.
Tropical Depression Seven is currently located less than 1,200 miles east-southeast of the northern Leeward Islands and is moving west at 13 mph. As for the latest advisory from the National Hurricane Center (NHC), Tropical Depression Seven has maximum sustained winds of 35 mph with some higher gusts, and slow strengthening is expected. The track of the storm does not look like it will get into the Gulf of America.
