Oil Markets Taking Orders from API Data

By: Harry Altham, Energy Analyst, Market Analysis EMEA & Asia

Wed, 02 Nov 2022, 11:54

Mild Weather and LNG Availability Helping European Gas Outlook, but Policy Uncertainty Looms

Harry Altham

Energy Analyst, EMEA & Asia

Brent and WTI have started the day 0.2% higher, as yesterday’s API data indicated a crude oil inventory shrinkage of 6.53M bbl last week. The API data are currently leading market moves, with the 2.64M bbl gasoline drawdown sending NYM RBOB’s December contract 0.37% higher ($260.41) and the 865k bbl build in distillate inventories dragging NYM Harbor down by 0.50% ($360.30). This week’s build in distillate inventories is likely to be insufficient to cool the East Coast diesel spot market, as DOE PADD 1 inventories hover close to all-time record lows [already at all-time seasonal lows] (data back to 1982). To that end, U.S. Gulf Coast spot diesel is 81.5c/gallon cheaper than in New York – which has resulted in an arbitrage opportunity for internal seaborne transfers of diesel to New York from the Gulf. With the end of the U.S. harvest season upon us, we expect diesel demand to drop between now and March, but with the end of the 1M bbd release of SPR stockpiles and diesel and gas-starved Europe also in the fray, we do not see an imminent end to pressure on U.S. diesel inventories – and indeed prices - over the coming few months.

Source: Bloomberg, StoneX

OPEC+ BOOSTS LONG TERM OUTLOOK

OPEC+ have boosted their long-term oil demand outlook versus their 2021 forecast, with their latest estimate that world oil consumption will peak at around 110M bbd around the year 2040, before a plateau that it estimates will last at least five years. The group estimates that over $12tn will be required in investments between now and 2045 to meet demand, which could prove to be a critical issue as financial institutions tighten their lending conditions for carbon-emitting projects – a commonly attributed cause for the current lack of spare capacity in oil and refining markets today. It attributes the later plateauing peak to the short-term focus on energy security, which it believes will hinder the pace of carbon substitution in industrial processes. For comparison, the IEA believes peak consumption will occur around 2035, with the war in Ukraine acting as a catalyst for ramping up investments into the green transition and energy security. We believe that straightened lending conditions over the coming two years will create a prolonged period of tightness in oil markets, and the longer-term outlook will be determined by the availability of capital from non-western lenders (in order to ease pressure on the supply-side).

GERMANY STILL RECEIVING RUSSIAN OIL, BUT DEADLINE LOOMS LARGE

Germany’s recorded imports of Russian crude fell to 400k bbd in August, which made up 24% of its total oil imports for that month; the United States’ 278k bbd compromised 16% and is expected to continue growing over the coming months as the Russian oil ban begins in one month’s time in Europe. With natural gas prices falling over the last month, fears are growing of a less than expected substitution to diesel in industrial production, which is causing some weakness in ICE Gasoil vis-à-vis other middle distillate benchmarks. Turning back to crude itself, Russia’s oil exports are approaching a critical moment, in which as much as 2.5M bbd fewer oil and products (basis 11.1M bbd in January 2022) could exit the country by February 2023 due to the imposition of sanctions by Western nations. We believe that Russian exports could rise again later into the year, although prospective buyers remain reluctant to purchase Russian oil; the only large scale non-European buyers in October were China, India, and Turkey, and any export-recovery is likely to require additional buyers as well as increased quantities from existing recipients.

Energy

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Perspective: Morning Commentary for August 5

August 5 – U.S. equities markets are on fire this week, with both the Dow Jones and S&P 500 setting new all-time highs yesterday with futures indicating further gains again today; the marketplace remains optimistic over a deal with Iran despite no evidence of such as of yet. Crude oil is working on a lower high and low today but remains slightly on the high side on the session, while the dollar is retreating back towards Monday’s nearly two-month low. The ten-year note is steady-to-lower this morning (though solidly lower so far this month) at 4.605%, while the VIX index continues to rebound into mid-week at almost a 17-point reading this morning.

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August 4 – The benchmark Dow Jones Industrial Average surged into the close yesterday to finish almost 700 points higher, at a record close of 53,178 points – easily clearing the previous top from almost a month ago. The S&P 500 is on the brink of its own record as well, while the NASDAQ index is short of June highs but working on a strong three-session rally. All three are pointing to positive openings today. Palantir (a U.S. software company) reported better-than-expected earnings yesterday afternoon post-close to boost the tech sector, though a host of other firms reported strong earnings as well. The ten-year note continues to retreat from Friday’s high, now at 4.67%, with the dollar on the high side of level-par, while the VIX index now under 16 shows reduced volatility.

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Permian Gas Has Become the Awkward Byproduct of America's Oil Boom

America's oil boom has an awkward side effect in the Permian Basin, where the natural gas that surfaces alongside crude has become something producers struggle to get rid of. With takeaway capacity stretched, Permian gas prices have fallen below zero, leaving drillers paying others to haul the gas away.

Editorial TeamMon, 03 Aug 2026, 22:43

Energy

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