Oil prices eased on Thursday, reversing course from the previous session, as rising output from Russia and worries about a potential global recession weighed on futures.
Brent crude futures fell 33 cents, or 0.4 percent, to $93.32 a barrel. US crude futures fell 40 cents, or 0.5 percent, to $87.71 a barrel.
Prices rose more than 1 percent during the previous session, although Brent touched its lowest level since February.
Futures have fallen over the past few months, as investors have pored over economic data that has spurred concerns about a potential recession that could hurt energy demand.
British consumer price inflation jumped to 10.1 percent in July, its highest since February 1982, intensifying a squeeze on households.
In supply, Russia has started to gradually increase oil production after sanctions-related curbs and as Asian buyers have increased purchases, leading Moscow to raise its forecasts for output and exports until the end of 2025, an economy ministry document reviewed by Reuters showed.
Russia’s earnings from energy exports are expected to rise 38 percent this year partly due to higher oil export volumes, according to the document, in a sign that supply from the country has not been affected as much as markets originally had expected.
Saudi Arabia’s crude oil exports rose in June, while output increased to a more than two-year high, data from the Joint Organizations Data Initiative (JODI) showed on Wednesday.
Meanwhile, the market is awaiting developments from talks to revive Iran’s 2015 nuclear deal with world powers, which could eventually lead to a boost in Iranian oil exports.
Meanwhile, US oil companies are working around a century-old shipping law to supply fuel to the US East Coast, according to data from Refinitiv and oil trading sources, as high demand for gasoline and global disruptions in fuel markets sent prices higher.
Traders are increasingly sending unfinished gasoline components from the Gulf Coast to Buckeye Partners LP’s terminal in the Bahamas, also known as Borco, where they are blended into finished gasoline to be sent to the US East Coast. The uncommon trade is a sign of heavy demand for products up and down the coast, home of some of the nation’s largest consumer markets.
The trade represents a legal workaround to the Jones Act, which requires goods moved between US ports to be carried by ships built domestically and staffed by US crew.
There is a limited quantity of those vessels, which raises the cost of those shipments.
Since March, at least eight vessels have transported gasoline components from the Gulf Coast to the Borco terminal in the Bahamas, and then delivered finished gasoline from there to ports along the Atlantic, according to shipping data.
The majority of the vessels were chartered by BP Plc. BP declined to comment.
Normally, Gulf Coast sellers make bigger profits either by exporting products, or by sending gasoline or diesel to the East Coast by way of the Houston-to-New Jersey Colonial Pipeline, which carries roughly 2.5 million barrels per day of gasoline and other fuels.
That line is jammed right now as US East Coast refineries struggle to meet demand. Those refiners are running at more than 98 percent capacity, according to the US Energy Information Administration.
Shippers submit requests to Colonial to move refined products on Colonial, but right now those requests exceed the line’s overall capacity. Space on the line is more expensive than in years, traders said, making it suddenly profitable to transport goods with the Bahamas stop.
This trade does not run afoul of the Jones Act, but it was uncommon before Russia’s invasion of Ukraine, and did not occur in 2021, according to available shipping data.
In 2021, the United States exported 146,000 barrels of gasoline components in total to the Bahamas, according to the EIA. In May 2022 alone, the most recent data available, that figure was 498,000 barrels.
Last year, the United States imported 699,000 barrels of finished gasoline from the Bahamas, or 1.8 percent of all imports of that product for the year. So far in 2022, the United States has already imported 1.2 million barrels of gasoline from the Bahamas.
In March, the Agean Star and Gulf Rastaq loaded fuel components in Houston, discharged at Borco and later supplied finished gasoline to Savannah, Georgia, and Jacksonville, Florida, according to shipping data.
The Nave Luminocity and Navig8 Success vessels loaded gasoline components in the Gulf, discharged at Borco and then transported finished gasoline to New Jersey and New York, shipping data showed. Several more ships made similar voyages through the summer. — Reuters