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Oil settles mixed on tight inventories, demand worries

The chimneys of the Total Grandpuits oil refinery are seen just after sunset, southeast of Paris, France, March 1, 2021.  REUTERS/Christian Hartmann
Summary
Trafigura CEO Weir sees ‘very, very tight’ oil marketOil price rally set to ease as supply rebounds, IEA saysFears of COVID lockdown in Europe, rising cases in ChinaU.S. crude stocks seen rising 1.4 mln bbls last week -pollUpcoming: U.S. oil inventory data from API on Tuesday

Nov 16 (Infoday) – Oil prices settled mixed on Tuesday, as prospects of tight inventories worldwide were offset by forecasts of a production increase in coming months and concerns over rising coronavirus cases in Europe.

Brent crude rose 38 cents, or 0.5%, to $82.43 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 12 cents, or 0.2%, to $80.76 a barrel.

“The oil market will remain tight in the short term, which should lend support to prices,” said Commerzbank analyst Carsten Fritsch.

Trafigura Group’s Chief Executive Officer Jeremy Weir said the tightness in global oil markets was due to demand returning to pre-pandemic levels. read more

Oil output from Texas’ Permian basin was forecast to reach a record 4.953 million barrels per day (bpd) in December. read more

U.S. crude stocks were expected to have risen for a fourth straight week, with analysts in a Infoday poll forecasting a build of about 1.4 million barrels last week.

The first of two weekly supply reports, from industry group the American Petroleum Institute, is due later Tuesday.

However, the International Energy Agency (IEA) said the oil market rally may ease as high prices could provide a strong incentive to boost production, particularly in the United States. read more

The IEA expects average Brent prices to be around $71.50 per barrel in 2021 and $79.40 in 2022, while Rosneft said it may reach $120 in the second half of 2022, according to the TASS news agency.

Secretary General Mohammad Barkindo of the Organization of the Petroleum Exporting Countries expects an oil surplus as early as December and the market to remain oversupplied next year. read more

OPEC last week cut its world oil demand forecast for the fourth quarter by 330,000 bpd from last month’s forecast, as high energy prices hampered economic recovery from the COVID-19 pandemic. read more

Worries about demand destruction also weighed as Europe has again become the epicentre of the COVID-19 pandemic, prompting some governments to consider reimposing lockdowns, while China is battling the spread of its biggest outbreak caused by the Delta variant. read more

The Biden administration has been considering tapping U.S. emergency stockpiles to cool rising oil prices. However, the acting head of U.S. Energy Information Administration said a release of oil from the U.S. Strategic Petroleum Reserve (SPR) would likely have only a short-lived impact on oil markets.

“The market looks fundamentally solid with strong physical markets, but with a lack of shorts in the market and SPR fears, the market simply cannot rally,” said Scott Shelton, energy specialist at United ICAP.

The dollar (.DXY) touched a 16-month high against a basket of currencies after strong U.S. retail sales data. A stronger dollar makes oil more expensive for buyers using other currencies. read more

Germany’s energy regulator also suspended the approval process for Nord Stream 2, a major new pipeline bringing Russian natural gas into Europe, driving benchmark Dutch front-month contract prices up 15%, the highest percentage gain in more than a month. read more

Higher prices for the fuel boosts oil demand as utilities switch to burning crude, rather than natural gas.

Reporting by Bozorgmehr Sharafedin in London; Additional reporting by Naveen Thukral, Roslan Khasawneh and Florence Tan in Singapore; Editing by Marguerita Choy, Jonathan Oatis and Richard Chang

Our Standards: The Thomson Infoday Trust Principles.

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