Oil quotes are unstable; the focus is on negotiations on Iran’s nuclear program and data on hydrocarbon reserves in the United States. However, yesterday, Brent’s quotes were still close to the highest levels since the beginning of the year, being in the range of $85.3-86.5 per barrel.
Facilitated by the growth of the U.S. consumer confidence index in October (for the first time in four months) – concerns related to the delta strain of coronavirus have eased. Surveys have shown that consumers have become more optimistic about their future income and employment prospects and are more likely to buy cars, houses, and household appliances.
The share of Americans planning a vacation in the next six months has also increased. However, further improvement in consumer sentiment in the coming months may be questionable due to rising prices for household goods.
December Brent futures fell by $0.41 to $86.4 per barrel at the end of the day. This morning, a barrel of Brent fell to $85.7 due to the data released the day before by the American Petroleum Institute (API) on hydrocarbon reserves.
Over the week, oil inventories increased by 2.32 million barrels, gasoline by 0.53 million barrels, and distillates by 0.98 million barrels. At the same time, oil reserves in Cushing’s storage facilities continue to decline (after an increase in late September and early October).
This time they decreased by 3.73 million barrels in a week. In addition, the spreads of the following four WTI futures rose to a state of backwardation (more than $1) due to less oil flow from West Texas to Cushing and an increase in exports from the Gulf coast.
Due to the growth of WTI quotations, its exports to Europe have become less attractive and may decrease, leading to an even more significant supply shortage in Europe. Thus, create the potential for further growth of Brent quotes. Now the backwardation on the WTI curve is more pronounced than Brent’s; that is, Brent calendar spreads are growing with a delay.
Today, investors are waiting for a weekly summary of oil inventories from the U.S. Energy Information Administration (EIA) to compare it with the already published similar statistics from the API. In addition, data on orders for durable goods for September are due to be released in the United States on Wednesday, and negotiations between Iran and the European Union on the nuclear issue will begin in Brussels.
These negotiations should note that a simple return to the 2015 nuclear deal (the official name is the Joint Comprehensive Plan of Action, JCPOA) can hardly satisfy the parties. Tehran wants to guarantee that the new U.S. administration will not resume sanctions in the future. On the other hand, Washington wants additional control measures, taking into account Iran’s success in implementing its nuclear program over the past year.
Diplomats will have a hard time, especially considering that the head of the Iranian delegation openly opposes a return to the JCPOA. However, suggests that may delay the negotiation process, and its success and even the possible format of new agreements are by no means apparent.
In light of the scheduled events, we believe that volatility in the oil market is likely to continue. Will quoted Brent in the range of $85.3-86.7 per barrel. The EIA data to support oil prices in the afternoon is near the upper limit of this range.
