Crude Stocks Rise, Pushing Down Oil Prices

by Wall Street Rebel | Michael London | 11/03/2021 12:39 PM
Crude Stocks Rise, Pushing Down Oil Prices

While oil reserves at the Cushing, Oklahoma, Nymex delivery hub fell by 900,000 barrels last week, total domestic output increased by 200,000 to 11.5 million barrels per day.

 

Following the release of official data from the United States government showing an increase in domestic crude stockpiles for the second consecutive week, oil futures plummeted, putting them on track to settle at their lowest level since October.

According to Kpler's Matt Smith, the lead oil analyst for the Americas, "ongoing dampened refining activity has contributed to another crude inventory build, despite steady growth in exports," according to an emailed statement.

According to the Energy Information Administration, which issued its figures on Wednesday, the United States' oil stocks grew by 3.3 million barrels in the week ending October 29.

S&P Global Platts conducted a poll of experts who expected a rise in crude oil output of 300,000 barrels on average.

According to the American Petroleum Institute, the production of crude oil increased by 3.6 million barrels per day on Tuesday.

On the New York Mercantile Exchange, West Texas Intermediate crude for December delivery fell $2.52, or 3 percent, to $81.39 a barrel, a loss of $2.52 from the previous day's settlement.

Jan. Brent crude, the world's benchmark oil futures contract on the ICE Futures Europe exchange, fell $2.17 or 2.6 percent to $82.55 a barrel, a loss of $2.17 or 2.6 percent.

According to FactSet data, a settlement around the current level for WTI oil would be the lowest for a front-month contract since October 14, while a settlement around the current level for Brent oil would be the lowest for a front-month contract on October 8.

Gasoline stockpiles declined by 1.5 million barrels in a single week. Still, distillate inventories increased by 2.2 million barrels over the same time period.

Following the S&P Global Platts survey, gasoline supplies were forecast to shrink by 900,000 barrels, and distillate supplies were predicted to fall by 1.5 million barrels.

According to Smith's study, distillates stocks climbed as "implied demand declined," and gasoline inventories decreased as "implied demand was reported as fairly strong for the time of year — although the weekly number should be taken with a grain of salt owing to its volatility."

While oil stocks at the Cushing, Okla., Nymex delivery hub decreased by 900,000 barrels over the week, overall weekly domestic petroleum production grew by 200,000 barrels, reaching 11.5 million barrels per day, according to Energy Information Administration.

Production of crude oil increased in the week ending March 31, "bolstering the supply side of the picture in conjunction with another Strategic Petroleum Reserve release hitting commercial stockpiles," according to Smith's report. Meanwhile, imports remained virtually unchanged from the previous week, he added.

According to the Energy Information Administration, gasoline prices decreased by 2.9 percent in December to $2.38 a gallon, while heating oil prices fell by 2 percent to $2.459 a gallon in the same month.

The end of the Federal Reserve's critical meeting on Wednesday, which is expected to influence oil prices, may also have an impact.

Due to the labor market deterioration, the Federal Reserve is widely expected to begin reducing its monthly bond purchases. Investors will be closely watching to see if policymakers change their inflation forecast or if Chairman Jerome Powell pushes back against rising market expectations that interest rate increases could begin sooner than previously indicated.

Thursday, the Organization of the Petroleum Exporting Countries and its allies (often called OPEC+) will convene, which will undoubtedly be a prominent subject of debate.

President Joe Biden and others have intensified the pressure on the organization to raise production more aggressively than is currently planned.

In a press conference on Wednesday at the COP26 climate conference in Glasgow, President Joe Biden said it was "unacceptable" for Russia, Saudi Arabia, and other suppliers to reduce supply to raise costs.

Gasoline prices have risen above $3.30 a gallon across the country, prompting President Biden to call for increased production from major energy-producing countries with spare capacity over the weekend. The call is part of a larger effort to put pressure on OPEC countries and Russia to increase the supply of oil.

Although producers had previously pledged to increase output by 400,000 barrels per day in monthly increments of 400,000 barrels per day, they were unwilling to move beyond their existing ambitions to expand production by an amount more than that level, according to industry observers.

In addition, businesses have had trouble fulfilling their production objectives in recent years.

 

                     Oil Could Hit $100 Sooner Than Expected, Blanch Says

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