Crude Oil increases in a competitive market, but gloomy warnings continue

Oct 19, 2022
VOT Research Desk

Market Insights, Considerations & Analytics

In a generally tight market, falling U.S. crude stocks offset the negative effects of uncertain Chinese demand growth, lower gas prices, and reports that the United States would release more oil from its reserves, causing oil prices to rise on Wednesday amid caution.

By 13:49 GMT, Brent crude futures for the December settlement were up 30 cents, or 0.3 percent, to $90.33 per barrel. Brent reached a low of $89.32 earlier in the session.

The price of US West Texas Intermediate crude for November delivery, which comes to an end on Thursday, was $83.16 per barrel, up 34 cents, or 0.4 percent. The contract for December was $82.41, up 34 cents, or 0.4 percent.

Due to reports that U.S. President Joe Biden intends to release 15 million barrels of oil from the Strategic Petroleum Reserve (SPR), the contracts fell to their lowest level in two weeks during the previous session.

Mild weather, a high number of liquefied natural gas tanker arrivals, and full gas storage tanks all contributed to this week’s decline in wholesale gas prices in the UK and the Netherlands. the prospects for gas-to-oil switching have taken a knock” and “the outlook for European gas prices over the coming months has taken a knock.

Worries about slowing growth were stoked this week when China postponed the release of important economic data in a highly unusual move.

However, private mega refiner Zhejiang Petrochemical Corp. (ZPC) and state-run ChemChina both received additional import quotas, indicating a resurgence in Chinese oil demand.

Prices were also supported by the output cut of 2 million barrels per day from the Organization of the Petroleum Exporting Countries and other producers, including Russia, a group known as OPEC+, and the upcoming ban on Russian crude and oil products by the European Union.

You have to wonder how OPEC+ countries would feel about how the markets are positioned and whether further cuts may be contemplated with Brent holding near $90 and WTI between $80 and $85.The sanctions imposed by the EU on Russian oil products and crude will go into effect in December and February, respectively.

UBS analysts wrote in a note that “prices need to rise above $100 a barrel in the coming months to slow demand growth and restore the supply-demand balance, in our view, given that oil inventories stand at a multi-year low.

According to market sources citing American Petroleum Institute figures, crude oil stockpiles in the United States decreased by approximately 1.3 million barrels.API/S

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