Notwithstanding the small crude inventory build reported by the Energy Information Administration and the American Petroleum Institute, “traders are aware that the market remains tight, the natural gas crisis in Europe continues and [liquefied natural gas] shipping lines remain clogged, while demand for all fuel types — coal, gas and oil — remains robust,” he said.
West Texas Intermediate crude for December delivery fell $1.99, or nearly 2.4%, to settle at $82.66 a barrel on the New York Mercantile Exchange, after ending Tuesday at another seven-year high. December Brent crude the global benchmark, lost $1.82, or 2.1%, at $84.58 a barrel on ICE Futures Europe, after closing Tuesday at a three-year high. January Brent the most actively traded contract, fell $1.78, or 2.1%, at $83.87 a barrel.
The Energy Information Administration reported on Wednesday that U.S. crude inventories rose by 4.3 million barrels for the week ended Oct. 22. On average, analysts polled by S&P Global Platts expected a 100,000-barrel decline, but the API on Tuesday reported a 2.3 million-barrel climb, according to sources. However, the EIA data also revealed that crude stocks at Cushing, Oklahoma, the delivery hub for Nymex futures, fell by 3.9 million barrels for the week. “While the headline crude build may be viewed as bearish, another significant drop in Cushing inventories — now down to 27 million barrels, the lowest since October 2018 — is likely set to limit today’s selloff,” said Matt Smith, lead oil analyst, Americas, at Kpler. “At the recent pace of draws, Cushing could be close to tank bottoms by December.”
“The only real production that can be increased in a timely fashion is from Saudi Arabia,” said Zahir. “Nigeria and others have had a hard time just trying to keep up with the increase in production that is already happening. All eyes will be on the OPEC meeting next week to see what Saudi Arabia does.”
Meanwhile, the EIA also reported weekly inventory declines of 2 million barrels for gasoline and 400,000 barrels for distillates. The S&P Global Platts survey expected supplies to decrease by 2.7 million barrels for gasoline and 2 million barrels for distillates. “Subdued refining activity has resulted in modest draws to both gasoline and distillates, despite implied demand dropping for both,” said Kpler’s Smith.
On Nymex Wednesday, November gasolinelost 2.7% to $2.45 a gallon and November heating oil shed 2.4% to $2.515 a gallon.
