Brent Rebounds, after Significant Price Slumps in Oil Market
Brent crude oil price rose moderately midweek while West Texas Intermediate (WTI) slumped further following a significant price slump on Tuesday amidst conflict in the Middle East.
ICE Brent traded at $81.72 per barrel. a 0.13% rise from the closing price of $81.61 a barrel in the previous trading session on Tuesday.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $77.32 per barrel, down 0.06% from Tuesday’s close of $77.37 per barrel.
The American Petroleum Institute’s (API) announcement on Tuesday of an estimated rise in US crude oil stockpiles of 11.9 million barrels, against the market expectation of a decline of 300,000 barrels, indicated a fall in the world’s biggest oil-consuming country’s oil demand, driving prices down.
Economic data in China, the world’s biggest crude oil importer, raised doubts about the demand outlook. China’s customs office reported a year-over-year drop of 6.4% in the country’s exports to $274.8 billion, marking the sixth straight month of export declines from China.
Chinese October trade data released yesterday showed a fall in the trade surplus last month with weaker exports. However, imports were stronger, including crude oil. Crude oil imports averaged 11.58MMbbls/d in the month, up 3.7% month on month and 13.5% higher year on year
Analysts said this leaves cumulative imports for the year at 11.41MMbbls/d, up 14.4% year on year, adding that stronger imports over the course of this year may reflect a recovery in domestic demand, while there will also be a fair amount of stock building.
The oil market came under significant pressure yesterday. ICE Brent settled 4.19% lower on the day and traded to its lowest level since July. Meanwhile, WTI settled below US$80 for the first time since August.
The market is clearly less concerned about the potential for Middle Eastern supply disruptions and is instead focused on an easing in the balance, ING commodities strategists said in a note.
They noted that there are clear demand concerns hovering over the market, and supply dynamics have also played a role. For example, Russian seaborne crude oil exports have grown in recent months, which suggests that Russia is not sticking to its additional voluntary cut.
The recent price weakness is likely to lead to growing noise from OPEC+ and in particular from Saudi Arabia, said ING commodities strategist on Wednesday.
Whilst Saudi Arabia and Russia confirmed that they would continue with their additional voluntary cuts through until the year-end, it is increasingly likely that they will extend this into the New Year if this downward pressure continues.
“The Saudis would like to keep Brent above US$80, as this is roughly where their fiscal breakeven price is. Our oil balance shows that the market will be in surplus in 1Q24, so further cuts are something we could certainly see”.
The weakness seen yesterday is likely to continue today, according to ING. The API released inventory numbers overnight which were bearish. US crude oil inventories increased by 11.9MMbbls over the last week, while Cushing crude oil stocks grew by 1.1MMbbls.
For refined products, gasoline inventories fell by 400Mbbls and distillate fuel oil stocks increased by 1MMbbls. The more widely followed EIA inventory report will be released later today.
In the EIA’s latest Short-Term Energy Outlook, there was little change to US crude oil production estimates. US crude oil output is expected to average 12.9MMbbls/d this year, up 1MMbbls/d YoY, while supply growth is expected to be much more modest next year, increasing by less than 250Mbbls/d to average 13.15MMbbls/d. CODE Empowers Communities to Track 47 Projects Worth $2.8m in Kaduna
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