05.11.202201:30 Forex Analysis & Reviews: The lack of supply in the oil market pushes prices up

Worries about the lack of supply of oil in the market lift its price on the charts on Friday. As a result, the highs since October 11 were updated.

Brent oil futures jumped 3.45% to $97.94 a barrel. Futures for WTI crude are up 4.12% to $91.75 per barrel.

Quotes of both grades grew on Wednesday as well, which was facilitated by reports from the US Department of Energy on the reduction of commercial oil reserves in the country following last week's results. According to the report, U.S. commercial inventories fell by 3.12 million barrels last week to 436.83 million. At the same time, gasoline inventories decreased by 1.26 million barrels to 206.63 million. Analysts assumed that oil inventories would decrease only by 200,000 barrels, and gasoline stocks by 1 million barrels.

Oil is getting more expensive despite the Federal Reserve's announcement of raising interest rates by 75 basis points, which eventually brings it to 4% per annum, that is, to the highest level since January 2008. Even Fed Chairman Jerome Powell's confidence that they are not going to move on to easing policy in the United States yet, does not prevent oil quotes from breaking high levels. By the way, Powell made it clear to the market that the final level of interest rates in the US could be even higher than investors expect.

The dollar, as expected, cheered up amid hawkish comments from Fed officials. A strong dollar, as you know, makes oil denominated in US currency more expensive for holders of other currencies. Well, and, accordingly, less attractive for investment.

The dollar index was down 0.43% to 112.32 on Friday. Nevertheless, the currency market flagship is preparing to end its most successful week of the month.

Meanwhile, the G7 countries (Great Britain, Germany, Italy, USA, Canada, France, Japan) and Australia agreed on November 3 to introduce a fixed price for oil from Russia. This is reported by Reuters.

A starting price has not yet been set, but it should be announced in the coming weeks. The G7 countries agreed to revise this fixed price as needed.

The agency also said that Russia could benefit from a floating price system, as the price of Russian oil would also rise if Brent oil rises in price due to reduced supplies from Russia.

Recall that on October 13, the US Treasury Department proposed to set the maximum price for oil from Russia - around $60 per barrel. Treasury Secretary Janet Yellen shared her opinion that this would reduce Russia's income from the sale of energy products, but also ensure that it retains profits from production.

On October 12, Russian President Vladimir Putin announced that energy supplies to those countries that decide to approve the price ceiling will be stopped.

On top of that, OPEC+ countries are promising to cut oil production by 2 million barrels per day this month. Taking into account that oil supplies from Russia are currently declining and, most likely, will be further reduced, the commodity market is under the threat of a serious shortage of supply. To be more precise, the lack of oil in the market could be 2.5 million barrels per day or even more. The effect of such restrictions from OPEC will be noticeable only by the end of this year, but traders are ready to open long positions in advance.

Traders were focused on data on the US labor market - the Nonfarm payrolls report. According to forecasts, the US economy created 200,000 jobs last month. If this figure turns out to be lower, then the pressure on the dollar may continue until the end of the trading day, which will additionally support oil quotes and help them stay in the green zone. And Brent oil has enough grounds to confidently maintain growth potential and even reach the level of $100 per barrel.