The Commodities Feed: Oil moves higher | Article
Energy – supply cuts continue to offer support to oil
Oil prices continue to strengthen following the 2MMbbls/d paper cut announced by OPEC+ on Wednesday. ICE Brent settled a little more than 1.1% higher yesterday, leading the market to trade above US$94/bbl. The crude oil market is now on course for its best week since mid-April.
Following the OPEC+ meeting, the Saudis released their official selling prices (OSPs) for November loadings yesterday. Aramco left the OSP for its Arab Light into Asia unchanged at US$5.85/bbl over the benchmark. Meanwhile, Europe saw cuts of US$1.80/bbl for both extra light and light grades. There were smaller cuts of US$1.50/bbl for both medium and heavy grades. All grades to the US saw a marginal increase of US$0.20/bbl.
The latest data from Insights Global shows that refined product inventories in the ARA region increased by 131kt over the last week to reach 5.33mt. Fuel oil stocks saw the largest increase, growing 83kt over the week to 1.13mt. Gasoil and jet fuel inventories increased by 27kt and 43kt respectively. Naphtha and gasoline inventories saw some moderate declines over the period.
As for the European gas market, noise around a possible price cap continues to grow. According to Bloomberg, Belgium, Italy, Greece and Poland have proposed implementing a price cap on natural gas, which would include a corridor/range that would allow prices to trade within a certain range of the cap. The EU will need to be careful with how they go about trying to cap gas prices. This type of intervention will make it more difficult for the market to balance through needed demand destruction.
In the US, natural gas prices continued to edge higher yesterday, despite the EIA reporting the largest weekly increase in inventories since 2015. US natural gas inventories increased by 129bcf, which was above market expectations of around 123bcf and also well above the 5-year average of 87bcf. Despite this large increase, total US natural gas inventories are still 7.8% below their 5-year average.
