HG MARKETS:

Oil prices are on the rise this week, showing their strongest performance since early June, with both major benchmarks jumping over 4%. This increase is primarily due to several key factors related to supply and demand.

A major driver has been Ukraine’s continued attacks on Russia’s energy infrastructure. In response, Russia has taken steps to restrict its fuel exports. On Thursday, Russian Deputy Prime Minister Alexander Novak announced a partial ban on diesel exports until the end of the year and extended a ban on gasoline exports. The resulting decline in Russia’s oil refining capacity has brought the country close to reducing its overall crude oil output. This situation has also led to fuel shortages in several Russian regions.

These supply concerns, along with a surprise drop in U.S. crude inventories, pushed both oil benchmarks to their highest levels since August 1st. According to a recent report by the U.S. Energy Information Administration (EIA), crude oil inventories fell by a modest 0.6 million barrels during the week ending on September 24.

However, some factors have capped further gains. The U.S. Commerce Department reported a stronger-than-expected upward revision to the second-quarter GDP, showing a 3.8% annualized growth rate. This robust economic data could make the Federal Reserve more cautious about future interest rate cuts, which could in turn affect oil demand. Additionally, prices were pressured by an announcement from the Kurdistan Regional Government that it would resume oil exports within 48 hours.

This movement in oil prices comes after the U.S. central bank recently made its first interest rate cut since December, signaling more reductions could be on the way if the labor market shows more signs of weakness.