Oil futures have declined, with US prices pulling back from a seven-year high after US government data showed a rise in domestic crude inventories and amid reports that Iran may soon revive talks on a nuclear deal.
The price decline “primarily reflects traders trying to lock in their gains, rather than a change in fundamentals,” said Manish Raj, chief financial officer at Velandera Energy Partners.
Notwithstanding the small crude inventory build reported by the Energy Information Administration and the American Petroleum Institute, “traders are aware that the market remains tight, the natural gas crisis in Europe continues and [liquefied natural gas] shipping lines remain clogged, while demand for all fuel types — coal, gas and oil — remains robust,” he added.
West Texas Intermediate crude for December delivery CL00, -3.05 percent CLZ21, -3.05 percent fell $1.99, or nearly 2.4 percent, to settle at $82.66 a barrel on the New York Mercantile Exchange, after ending at another seven-year high.
December Brent crude BRNZ21, -0.63 percent, the global benchmark, lost $1.82, or 2.1 percent, at $84.58 a barrel on ICE Futures Europe, after closing at a three-year high. January Brent BRN00, -0.58 percent BRNF22, -0.58 percent, the most actively traded contract, fell $1.78, or 2.1 percent, at $83.87 a barrel.
The Energy Information Administration reported that US crude inventories rose by 4.3 million barrels for the week ended Oct. 22. On average, analysts polled by S&P Global Platts expected a 100,000-barrel decline, but the American Petroleum Institute reported a 2.3-million-barrel climb, according to sources.
However, the EIA data also revealed that crude stocks at Cushing, Oklahoma, the delivery hub for Nymex futures, fell by 3.9 million barrels for the week.
“While the headline crude build may be viewed as bearish, another significant drop in Cushing inventories — now down to 27 million barrels, the lowest since October 2018 — is likely set to limit today’s selloff,” said Matt Smith, lead oil analyst, Americas, at Kpler. “At the recent pace of draws, Cushing could be close to tank bottoms by December.”
“At the recent pace of draws, the Nymex delivery hub at Cushing, Oklahoma, could be close to tank bottoms by December,” stated Smith.
Still, speculation over renewed talks surrounding a nuclear deal with Iran weighed on prices also.
“If this leads to the eventual withdrawal of US sanctions, Iranian oil exports will rise, ending the threat of a supply shortage that has been partly the reason behind the big oil rally,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a market update.
Iran’s chief negotiator, Ali Bagheri, said that Iran will return to nuclear discussions before the end of November, according to sources. Talks between the country and world powers to restore the 2015 nuclear deal had been suspended in June.
Traders also weighed up prospects for the outcome of a meeting next week of major oil producers.
“Saudi Arabia really is in control of price action as we go forward,” Tariq Zahir, managing member at Tyche Capital Advisors stated.
“The only real production that can be increased in a timely fashion is from Saudi Arabia,” said Zahir. “Nigeria and others have had a hard time just trying to keep up with the increase in production that is already happening. All eyes will be on the OPEC meeting next week to see what Saudi Arabia does.”
Meanwhile, the EIA also reported weekly inventory declines of 2 million barrels for gasoline and 400,000 barrels for distillates.
“Subdued refining activity has resulted in modest draws to both gasoline and distillates, despite implied demand dropping for both,” said Kpler’s Smith.
For more information visit www.opec.org
