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Supply risk: ANS up Russia, Venezuela, and Iran exports threatened; U.S. supplies drawn down
Steve Sutherlin Petroleum News
Alaska North Slope crude broke out of a downward trend Sept. 23 to leap $1.34 for a close of $69.40 per barrel. West Texas Intermediate gained 77 cents to close at $63.41, and Brent jumped $1.06 to close at $67.63.
The rally was spurred by restrictions and interruptions of oil exports from Russia, Venezuela, and Iraq.
Crude futures prices extended the rally Sept. 24 as traders digested comments made by President Trump the day prior that suggested Ukraine could win back all its territory taken by Russia if battles between the countries continue. The President further rallied European allies to cease purchases of Russian petroleum.
WTI crude leapt $1.58 Sept. 24 to close at $64.99, while Brent soared $1.68 to close at $69.31. ANS prices, which are estimated by the Alaska Department of Revenue, were not released before Petroleum News press time. WTI and Brent each hit their seven-week high on the day.
The crude rally lost steam in Asian trade early Sept. 25 likely due to profit taking, analysts said.
"Oil looks to be hitting a ceiling, with softer (seasonal) demand and rising OPEC+ supplies into Q4. Recent gains feel more sentiment-driven than fundamental, so unless a new shock emerges, Brent is likely to consolidate with a slight downside bias," said Priyanka Sachdeva, Phillip Nova senior market analyst Reuters reported.
Priyanka said sentiment risk-off sentiment was triggered as crude production from Iraqi Kurdistan was likely to start up within days, following an export agreement Sept. 23 between eight oil firms and Iraq's federal and Kurdish regional government.
The deal paves the way to restart flows of some 230,000 barrels per day -- halted since March 2023, according to a report published in Middle East Economy.
Middle East Economy said a J.P. Morgan report released Sept. 24 showed that global oil demand growth from Jan. 1 through Sept. 23 averaged 800,000 barrels per day, slightly below the bank's 830,000 bpd forecast.
U.S. weekly crude inventories drop again Continued drawdowns on U.S. crude, gasoline and distillate supplies added a trifecta of support for oil's rally Sept. 24.
U.S. commercial crude oil inventories for the week ending Sept. 19 fell 600,000 barrels from the previous week to 414.8 million barrels -- 4% under the five-year average for the time of year, according to U.S. Energy information Administration data released Sept. 24.
Analysts in a Reuters poll had called for a 235,000-barrel build.
The drawdown came on the heels of a massive and unexpected 9.3 million barrel draw the week before.
Total motor gasoline inventories decreased by 1.1 barrels for the period -- now 2% below the five-year average for the season, the EIA said.
Distillate fuel inventories dropped by 1.7 million barrels on the week, now 8% below the seasonal five-year average.
Ukraine attacks on Russian oil infrastructure continues to support prices.
Ukraine hit Russia's Salavat and Volograd oil refineries Sept. 18, interrupting 300,000 bpd of refining capacity, according to a Sept. 22 Barchart report. Two days earlier, Ukraine hit Russia's Transneft Pipeline -- transport for 80% of the country's oil.
The Kirishi refinery -- one of Russia's largest with annual processing capacity of over 20 million tons -- halted crude processing after damage caused by a Ukrainian drone attack Sept. 21, Barchart said, adding that Ukrainian drone attacks have damaged Russian oil infrastructure and crude-exporting hubs along the Baltic Coast.
"Ukrainian drone and missile attacks on Russian refineries have curbed Russia's total refined-product flows to 1.94 million bpd in the first fifteen days of September, the lowest monthly average in over 3.25 years," it said.
Russia's finances have been stricken as well.
Russia's finance ministry proposed upping its value-added tax to 22% from 20% in 2026 to fund the Ukraine war and help curb a ballooning budget deficit, Reuters reported.
Chinese stockpiling sets floor for crude Because of China stockpiling, Brent front month futures have held above $65 for most of recent months, "despite OPEC+ accelerating the reduction of production cuts," according to Rystad Energy research covered by Oil and Gas Journal.
China has added 156 million barrels of crude to storage since March -- an average monthly increase of 1.16 million bpd from March through June.
"China's oil stockpiling goes against the grain as the global oil market has been in firm backwardation -- where current prices are above future delivery prices -- which does not support crude oil storage," said Lin Ye, Rystad vice-president, oil markets -- downstream. "Conversely, crude inventories outside China have declined during the same period -- China's stockpiling has provided a temporary price floor by mopping up excess supply, yet its efficacy is constrained by geopolitical factors, global supply changes and Beijing's policy redirection."
Prior to the Sept. 23 rally, the bears held the stage as demand worries dominated crude markets.
ANS fell 37 cents Sept. 22 to close at $68.06, as WTI inched 4 cents lower to close at $62.64, and Brent fell 11 cents to close at $66.57.
On Sept. 19, ANS dropped 85 cents to close at $68.43, WTI dropped 89 cents to close at $62.68, and Brent dropped 76 cents to close at $66.68.
ANS fell 49 cents Sept. 18 to finish at $69.28, while WTI fell 48 cents to close at $63.57, and Brent fell 51 cents to close at $67.44.
On Sept. 17 ANS fell 49 cents to close at $69.77, WTI fell 47 cents to close at $64.05, and Brent fell 52 cents to close at $67.95.
ANS slid 37 cents over the trading week from its close of $69.77 Sept. 17, to its close of $69.40 Sept. 23.
On Sept. 23 ANS closed at a $5.99 premium over WTI, and at a premium of $1.77 over Brent.
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