Oil Prices Flat on the Week, Shrugging off Rate Cut

VIENNA (DTN) – Oil prices softened for a third straight session Friday (9/19) morning as tepid initial support from a modest U.S. rate cut fizzled out.

Concerns of a supply glut also returned, weighing further on the market, despite threats of reinforced sanctions against Russia.    

In crude, NYMEX-traded WTI for October delivery dropped $0.29 to $63.28 bbl, while ICE Brent for November delivery fell $0.31 to $67.13 bbl.

Among oil products, October RBOB gasoline futures slid $0.0207 to $1.9907 gallon, and the front-month ULSD contract retreated $0.0215 to $2.3185 gallon.

The U.S. dollar index strengthened by 0.184 points to 97.155, rising a third straight session, inverse to the oil markets in a trend visible since the Federal Reserve’s 25-basis point rate cut on Wednesday (9/17).  Some market participants had expected a 50-basis point cut.

This week’s macroeconomic data releases added to the lackluster sentiment, as did a mixed U.S. oil inventory report.

The U.S. Energy Information Administration, said nationwide distillate fuel oil inventories jumped 4.7 million bbl, or 4%, in a single week to 120.6 million bbl — showing rapidly expanding middle distillate stock.

On the sanctions front, the European Commission was expected present to member states the revised 19th package of sanctions against Russia over the Ukraine war as early as Friday. The package aims to phase out Western purchases of Russian oil more quickly amid pressure from the Trump administration.

But the sanctions package has issues as well. While Russian flows to Europe have plummeted since the invasion of Ukraine, two landlocked NATO and EU countries, Slovakia and Hungary, are currently exempt from the EU embargo on Russian oil imports, given their limited supply alternatives.

Market participants also remain concerned about oversupply, given that non-OPEC oil production growth alone is outpacing global demand growth. In addition, OPEC+ could further unwind production curtailments in the months ahead.