Oil prices recovered after the publication of optimistic data on stocks. On Wednesday, Brent quotes first fell by $1.2 to $83.6 per barrel but then recovered to $86 per barrel after the weekly report of the US Energy Information Administration (EIA) showed an unexpected reduction in oil and petroleum products stocks. Oil reserves decreased by 0.431 million barrels during the week.
The American Petroleum Institute (API) reported a weekly increase of 3.29 million barrels due to a decrease in oil production by 0.1 million barrels per day to 11.3 million barrels per day. And about an increase in exports by 0.55 million barrels per day to 3.06 million barrels per day, and a decrease in imports by 0.17 million barrels per day to 5.83 million barrels per day.
It should note that imports decreased by 1.2 million barrels per day in the first half of the month. At the same time, reserves in Cushing’s oil storage facilities fell by 2.3 million barrels to 31.2 million barrels, which was the most significant drop since February of this year. In November, Cushing’s reserves are likely to drop to 30.3 million barrels, and in December – to less than 30 million barrels. As a result, oil reserves in the United States now slightly exceed the 2018 minimum and are below the five-year average.
Gasoline stocks also unexpectedly decreased significantly, from 5.37 million barrels to 217.7 million barrels, corresponding to the minimum since November 2019. Their decline is observed despite an increase in gasoline production at refineries (which are undergoing seasonal maintenance and produced more gasoline and fewer distillates last week), while the level of demand (four-week moving average) is now the highest for this season since 2007.
The reduction in gasoline stocks in high-demand conditions contributes to the growth of gas station prices, which are likely to remain at historical highs: earlier this week, they rose to $3.36 per gallon. The decrease in distillate reserves (by 3.91 million barrels to 125.4 million, or the minimum since April 2020), in turn, is explained by a reduction in production.
In the USA, the soybean and corn harvest season continues, and the demand for heating increases against the background of a cold snap. However, demand for aviation fuel has not yet recovered: the four-week moving average is now the lowest since 2014 (excluding 2020). Nevertheless, the picture may differ in the EIA report next week, as passenger traffic proliferating at airports. Yesterday, the fixation on the nearest Brent futures was at $85.82 per barrel, $0.74 higher than the day before.
This morning, Brent quotes rose to a new high since the beginning of the year – $86.1 per barrel, but then fell to $85.3 per barrel. The focus today is on the energy forum in India, at which, among others, the Minister of Energy of Saudi Arabia will speak. In addition, weekly data on applications for unemployment benefits in the United States and the eurozone consumer confidence index for October will be during the day.
Given that oil prices failed to gain a foothold above $86 per barrel in the morning, the stock market is declining, and the dollar is strengthening, we expect that Brent quotes will probably begin to consolidate in the range of $85.3-86.1 per barrel.
An additional negative factor may be the comments of the Minister of Energy of Saudi Arabia at the forum in India if he hints at a possible increase in OPEC+ production. At the same meeting, the Indian Oil Minister expressed concern that high prices for hydrocarbon raw materials threaten economic growth.
According to him, India’s demand for diesel fuel is higher than before the pandemic, contributing to inflation acceleration. He also said that OPEC+ should take into account the interests of oil-consuming countries.
The same opinion was expressed on Monday by the Prime Minister of Japan, noting that the recently increased oil prices should incentivize oil producers to increase production.
