Oil Futures Benefit from Stronger than Expected USA Fuel Demand

In a market analysis sent to Rigzone on Thursday, Maria Agustina Patti, a Financial Markets Strategist Consultant to Exness, said oil futures “stabilized to a certain extent, benefiting from stronger than expected U.S. fuel demand following a surprise drop in both crude and gasoline inventories”.

“This unexpected drawdown, reported by the Energy Information Administration (EIA), supported expectations of a more robust demand and could help stabilize crude prices,” Patti stated in the analysis.

“Additionally, reports that OPEC+ may delay a planned production increase in December could add further support to the market, as tighter supply could help limit the market’s decline,” Patti added.

In the analysis, Patti said global factors are also influencing the market, “particularly as China’s manufacturing activity expanded in October for the first time in six months, suggesting stimulus measures could contribute to crude demand from the world’s largest importer”. 

Patti warned, however, that traders could continue to monitor developments in China.

“Meanwhile, in the Middle East, easing tensions with potential ceasefire deals in sight could continue to weigh on the market,” Patti added.

“The market could strongly react to upcoming data releases in the U.S. and China as traders gauge the demand outlook,” the strategist continued.

The EIA’s latest weekly petroleum status report, which was released yesterday and included data for the week ending October 25, showed that crude oil stocks, excluding the Strategic Petroleum Reserve (SPR), stood at 425.5 million barrels on October 25, 426.0 million barrels on October 18, and 421.9 million barrels on October 27, 2023.

“U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.5 million barrels from the previous week,” the EIA stated in its report.

“At 425.5 million barrels, U.S. crude oil inventories are about four percent below the five year average for this time of year,” it added.

Total motor gasoline inventories decreased by 2.7 million barrels from last week and are about three percent below the five year average for this time of year, the EIA noted in the report, adding that finished gasoline inventories and blending components inventories both decreased last week.

“Distillate fuel inventories decreased by 1.0 million barrels last week and are about nine percent below the five year average for this time of year. Propane/propylene inventories decreased by 0.2 million barrels from last week and are 11 percent above the five year average for this time of year,” the EIA said.

Total petroleum stocks came in at 1.634 billion barrels on October 25, according to the report. That figure marked an 8.3 million barrel week on week drop and a 20.4 million barrel year on year gain, the report outlined.

In a research note sent to Rigzone by the JPM Commodities Research team late Wednesday, J.P. Morgan analysis noted that, in the U.S., “distillate consumption has reached a one-year peak on a four-week rolling average, while gasoline demand remains steady at a post-Covid seasonal high at approximately 9.0 million barrels per day”.

“Meanwhile, visible distillate stocks have decreased by 10 million barrels across the U.S. Europe, and Singapore by October 25, likely due to a surge in heating oil demand,” they added.

The J.P. Morgan analysts highlighted in the research note that global oil demand has averaged 103.4 million barrels per day month to date through October 30. They pointed out that this marked a 2.1 million barrel per day year over year increase and exceeded their estimates by 0.1 million barrels per day, “primarily due to strong demand for distillates”

“Year to date, demand has risen by 1.2 million barrels per day compared to our November 2023 forecast of a 1.5 million barrel per day increase,” they added.

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