Analyst Looks at Latest Oil Price Moves

(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)

In this week’s edition of oil and gas industry hits and misses, one of Rigzone’s regular market watchers looks at the latest oil price moves, Venezuelan crude flows, Chinese government actions and more. Read on for more detail.

Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?

Tom Seng, Director – School of Energy Economics, Policy, and Commerce, University of Tulsa’s Collins College of Business: After a nine-day downtrend, WTI prices stair-stepped to a three-week high this week on a possible further output cut by the OPEC+ group, Covid-19 lockdown easing in China, a large inventory draw, an expected halt to SPR releases, and a weaker U.S. dollar. Brent crude, however, managed to recover from a 10-month low to a two-week high, aided by the prospect of a cap on Russian oil which could lead to less of the Urals hitting the global market. WTI has risen to as high as $81.50 per barrel recently while Brent approached $89.40. Both grades look to end higher week over week. The only bearish signal of the week appeared to be the continuing increases in gasoline and distillate stocks.

This week’s EIA Weekly Petroleum Status Report indicated that inventories of commercial crude fell by a substantial 12.6 million barrels to 419 million, slipping to eight percent below normal for this time of year. The API reported that inventories declined 7.9 million barrels, while the WSJ survey predicted a decrease of 2.1 million barrels. Refinery utilization ticked-up to 95.2 percent vs 93.9 percent the prior week. Total motor gasoline inventories rose by 2.8 million barrels to 214 million barrels, now at four percent below average. Distillates increased 3.5 million barrels to 113 million barrels, rising to 11 percent below normal. Crude oil stocks at the key Cushing, OK, hub fell 415,000 barrels to 24.3 million barrels, or 31 percent of capacity. Imports of crude oil were six million barrels per day, while crude exports were 4.95 million barrels per day, the highest level in several weeks. Exports of refined products were 6.8 million barrels per day, up from 5.7 million barrels per day. Volumes withdrawn from the Strategic Petroleum Reserve were 1.4 million barrels, which dropped the total inventory to 389 million barrels. U.S. oil production held at 12.1 million barrels per day vs 11.6 million barrels per day last year at this time. September oil production, at 12.3 million barrels per day average, was the highest since March 2020.

Venezuelan crude may return to U.S. refiners now that Chevron has been cleared to resume oil production in that country. The U.S. government wants to double the inventory of heating oil and crude in the Northeast Home Heating Oil Reserves (NEHHOR) to help lower prices and ensure adequate supplies exist. Currently, there is about one million barrels in storage. The OPEC+ group will meet this weekend with market watchers speculating that additional cuts could be announced if Brent stays below $90 per barrel. The Biden administration has approved the Sea Port Oil Terminal, one of four proposed offshore terminals planned to increase U.S. oil export capacity. Once in service, SPOT will be the country’s largest oil export terminal with a capacity of two million barrels per day. The EU Commission is asking member nations to approve a $60 per barrel price cap on Russian oil. All three major stock indexes are higher on the week while the US Dollar index (DXY) fell to its lowest level in 16 weeks, aiding the oil rally.

Rigzone: What were some market surprises?

Seng: The Chinese government seems to be reversing course from its crackdown on lockdown protestors and is now not requiring that those with Covid-19 be housed in government quarantine centers. Despite rising oil prices, the price of gasoline at the pump has fallen to below $3.50 per gallon, the lowest since February just prior to Russia’s invasion of Ukraine.

Rigzone: What developments/trends will you be on the lookout for next week?

Seng: Will the EU member nations approve the proposed $60 per barrel cap on Russian oil? Will OPEC+ decide to reduce their output once again? And, will the Biden administration actually halt future sales of oil from the SPR, at least for some period of time?

To contact the author, email andreas.exarheas@rigzone.com