The Commodities Feed: Oil sell-off overdone | articles
Sentiment in the oil market continues to weaken. ICE Brent came under further pressure yesterday, settling more than 1% lower and taking prices below $78/bbl. A bearish overnight API release is likely to keep pressure on the market in the immediate term. API data shows that US crude oil inventories rose by 4.1m barrels over the last week, very different to the more than 2m barrel decline the market was expecting. Cushing crude oil stocks also increased by 1m barrels, while gasoline and distillate inventories rose by 4m barrels and 2m barrels respectively. The more widely followed weekly EIA report will be released later today.
While the market has been disappointed that OPEC+ will gradually unwind cuts, it is important to remember that this is only from October. Our balance sheet continues to show a tightening in the oil market over the third quarter. Therefore, we believe the scale of the sell-off at the front end of the forward curve is overdone. The decision from OPEC+ warrants relatively more weakness further along the forward curve (we currently see a small surplus in 2025 with the gradual return of OPEC+ supply), but speculative money will be largely positioned in the nearby prompts. The technicals also suggest that the oil market is entering oversold territory. However, a concern for the market remains the weakness in refinery margins.
European natural gas prices gave back all of Monday’s gains yesterday. Front-month TTF futures settled more than 6% lower on the day. This is after Norwegian pipeline operator, Gassco, said that an unplanned outage due to a pipeline crack at the Sleipner gas field in the North Sea, will likely end on Friday. The unplanned outage has seen Norwegian daily flows to Europe fall from around 300mcm/day to less than 270mcm/day. Despite the outage, European gas storage continues to trend higher. The latest data from GIE shows that storage was 71% full on Monday, above the 70% seen at the same stage last year and above the 5-year average of 59%.
