Oil prices fluctuate, but remain stable ahead of potential US rail strike

The market is balancing weak demand with potential supply disruptions in the US where a potential strike among rail workers could affect oil supplies.

Photo: Jacob Ehrbahn

Oil prices are slightly lower Thursday morning from market close in Europe Wednesday.

The market is balancing weak demand with potential supply disruptions in the US where a potential strike among rail workers could affect oil supplies, writes Reuters.

A barrel of European benchmark crude Brent costs USD 93.94 Thursday morning against USD 94.69 Wednesday afternoon. Meanwhile, US counterpart West Texas Intermediate trades concurrently for USD 88.49 per barrel against USD 88.98 Wednesday morning.

”The oil price has been pricing in a global recession, but even with flat global growth, the oil demand would remain quite strong relative to continued supply worries,” says Chief Economist at ACY Securities Clifford Benet in a note, according to Reuters.

In his view, the market has had too little focus on issues on the demand side.

A conflict is currently brewing between employers and workers in the US railway industry. Three unions are involved in contract negotiations at this juncture.

Such a conflict could affect railroad shipments of oil, vital to both transporting crude and refined products.

In addition to reduced supply, the International Energy Agency reported Wednesday that it expects a shift from gas to oil when it comes to heat consumption.

The IEA forecasts average consumption of 700,000 barrels per day from October 2022 to March 2023 – twice the level from last year. This, along with weak supply growth, could buoy up oil markets, writes Reuters.

However, data from the US Energy Information Administration shows that US oil inventories increased more than anticipated in the past weak, indicating weaker demand and putting a damper on oil prices.

Moreover, expected interest rate hikes also serve to keep prices in check, according to analysts from Haitong Futures, writes Reuters.

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