Overview and Outlook

Crude oil prices witnessed sharp downside movement in last two months as US gasoline inventories increased by almost 6.5MMbbls over the week- the largest increase since January 2022. This move has helped to take total US gasoline inventories back above the five-year average for this time of year. Oil prices came under pressure on expectations that OPEC+ might not deepen output cuts next year after the producer group postponed its policy meeting.

China’s decreased oil demand is playing a significant role in the global oil market, countering recent crude price surges. The country’s shift away from costly crude imports towards refined product exports and its large oil inventories are influencing global prices and supply dynamics. In near term oil prices will be driven by fears of global recession, high inflation and as well as ongoing geopolitical developments and recovery in dollar index.

The OPEC+ ministerial panel made no changes to the group’s oil output policy, and Saudi Arabia said it would continue with a voluntary cut of 1 million barrels per day (bpd) until the end of 2023, while Russia would keep a 300,000 bpd voluntary export curb until the end of December.

Moreover, the re-emergence of Iraqi Kurd barrels and new Surinamese and Guyanese barrels were also noted as factors influencing the oil market. Such developments indicate a diversified supply source, potentially adding to the volatility of prices.

In near to medium term prices are expected to take support near 5900-5800 and resistance near 7600-7700 in MCX. In NYMEX prices are expected to take support near $67-65 while facing resistance near $93 levels in NYEMX.

Factors affecting Crude oil prices

OPEC meeting

Organization of the Petroleum Exporting Countries and allies including Russia delayed a ministerial meeting at which they were expected to discuss oil output cuts to Nov. 30. Several members are reportedly unhappy about their production targets for next year, levels which were announced back in June. This is specifically the case for Angola, Congo and Nigeria, who had their production targets cut since they struggled to hit their 2023 targets. These members were unhappy back then, and it was agreed that their targets would be revisited before the end of this year and possibly revised higher.

EIA Weekly report

EIA’s weekly inventory report was fairly bearish with US crude oil inventories growing by 8.7MMbbls over the week. This leaves total US commercial crude oil inventories at a little over 448MMbbls – the highest level since July. Despite refinery utilisation remaining below average levels for this time of year (following a fairly heavy maintenance season), gasoline stocks still increased by a marginal 750Mbbls. However, the distillate market continues to tighten. Distillate fuel oil inventories fell by a little over 1MMbbls, which leaves stocks at a little under 106MMbbls- the lowest since May 2022 and at the lowest level in at least 20 years for this time of year.

U.S. rig count

The latest data from Baker Hughes shows that the US oil rig count increased by 6 over the last week to 500, which is the largest increase since February. However, the rig count is still down close to 20% YTD. The slowdown in drilling activity this year suggests that US supply growth in 2024 will be much more modest than the roughly 1MMbbls/d supply growth estimated for this year.

Russia lifted export ban on Diesel

Russia announced that it lifted its export ban on gasoline with the domestic market a lot more comfortable now. The export ban had been in place since 21 September, and it originally included diesel as well. Russia is a fairly small exporter of diesel, exporting less than 5m tonnes last year.

Weekly Chart of Crude oil (NYMEX)

Analysis

In NYMEX Crude oil prices has been witnessing consolidation at lower levels as it took support near $69-70 levels and now hovering near $75 levels. Moreover prices are bouncing from the lower bollinger band on weekly chart and can move towards middle bollinger band. In near to medium term prices are expected to take support near $69 while facing resistance near $83-85 levels.

Weekly Chart of Crude oil (MCX)

Analysis

In MCX Crude oil prices have been witnessing consolidation at lower levels as it took support near 5800-5850 zone .Moreover prices are bouncing from lower bollinger band and can move towards middle bollinger band. In near to medium term prices are expected to take support near 5800-5850 levels and resistance near 6700 levels.

Disclosure

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