WTI Falls to 2-Week Low on Russian Crude Discounts, Oversupply Fears


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Oil futures hit two-week lows on Tuesday (12/9) amid 
concerns about mounting Russian crude supplies offered at deeper discounts that 
could add to the market's oversupply.

   The Kremlin's favorable response to a new U.S. national security strategy 
that called for better relations with Moscow also signaled that Russia did not 
feel pressured by the Trump administration's bid to find a quick end to the 
Ukraine war, market participants noted.

   A resolution to the Ukraine conflict is seen as key for the removal of U.S. 
and European sanctions on Russian oil. Without the sanctions, millions of 
Russian barrels, now stranded at sea, can make their way legally into global 
markets, adding to the oversupply in crude. OPEC, or the Organization of the 
Petroleum Exporting Countries, had already cautioned that the crude market was 
already in a surplus of 500,000 bpd as of the third quarter.

   "From selling Urals at greater discounts and responding with just the right 
diplomatic touch to U.S. overtures for Ukraine, the Russians are managing the 
sanctions against them and effectively stalling any quick end to the Ukraine 
conflict, unless it's on their terms," said John Kilduff, partner at New York 
energy hedge fund Again Capital.

   The average price for Urals crude sold from the port of Novorossiysk in the 
Black Sea was reported at $38.28 bbl, down by $2.80 bbl from the previous week.

   The NYMEX WTI futures contract for January delivery settled down by $0.63 
bbl at $58.25 bbl after hitting a two-week low at $58.15.

   ICE Brent for February shipments settled down by $0.55 bbl to $61.94 bbl 
after a two-week low at $61.84.

   The front-month RBOB futures contract slid by $0.0033 to $1.7948 gallon.

   NYMEX front-month ULSD futures slipped by $0.0337 to $2.2645 gallon.

   The U.S. dollar index was little changed at 99.21 against a basket of 
foreign currencies.

   The start of a two-day Federal Reserve meeting did little to help the 
sentiment in energy markets, despite initially limiting their downside Tuesday. 
The meeting could end Wednesday (12/10) with a third straight interest rate cut 
of 25 basis points for the year -- a development that typically boosts oil 
futures, given the sensitivity of the energy component to economic boosting 
measures.

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