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Oil down 3% again on U.S. stockpile build, IEA warns against $100 a barrel

Published 11/09/2022, 02:56 PM
Updated 11/09/2022, 02:57 PM
© Reuters.

By Barani Krishnan

Investing.com -- U.S. oil inventories have been volatile of late and crude prices have been overreaching on their way up and down, depending on whether the data shows a stockpile build or drop. 

But when the head of the International Energy Agency, or IEA, cautions about the damage $100 a barrel can do to the economy, especially when U.S. crude stockpiles come in three times more than forecast, expect the “damage” to oil bulls to be worse.

Oil prices fell 3% for a second day in a row to show a net loss of 7% on the week — that wiped out all of last week’s 5% gain — as IEA chief Fatih Birol’s warning about the hazards of triple-digit pricing coincided with a large crude stockpile build reported by the U.S. government.  

New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled  Wednesday’s trading down $3.08, or 3.5%, at $85.83 per barrel, extending the near 4% slide from two previous sessions. WTI hit a three-month high of $93.74 on Monday.

London-traded Brent, the global benchmark for oil, settled down $2.71, or 2.8%,  at $92.65, adding to the 3.2% drop between Monday and Tuesday. Earlier this week, Brent came within cents of touching $100, with a session high of $99.56.

Crude inventories jumped by 3.925 million barrels during the week to Nov. 4, the Washington-based Energy Information Administration, or EIA (not to be confused with Birol’s Paris-based IEA), said. The market had expected a build of 1.36M barrels instead. In the previous week to Oct. 28, crude inventories saw a drop of 3.115M in stockpiles.

Distillate stockpiles fell by 0.521M barrels last week versus a forecast drop of 0.8M. In the previous week, distillates saw a build of 0.427M.

Gasoline inventories, meanwhile, dropped by 0.899M barrels, against expectations for a draw of 1.08M barrels, the EIA said. In the previous week, gasoline saw a drop of 1.257M in stockpiles.

Total U.S. gasoline consumption for last week was impressive at  9.011M barrels per day, versus the previous week’s 8.66M bpd.

But other key statistics like crude exports and production were disappointing.

Crude exports have stabilized at around 3.5M barrels per day from the 5M bpd peak of two weeks ago, and withdrawals from the SPR appeared to be their last gasp of around 3M barrels per week. 

U.S. crude production, meanwhile, has jumped to 12.1M bpd, up 200,000 from the previous week.

Birol, the executive director at the IEA, added to oil’s bearish case when he said prices flirting with $100 per barrel were “a real risk to the global economy”.

“OPEC+ production cuts could push inflation even higher and weaken the global economy,” Birol added.

The IEA chief’s warning touched on an area that had been overlooked of late as OPEC+, officially led by Saudi Arabia, with allies steered by Russia, pushed ahead with maximizing revenue for its oil by announcing a production cut of 2M barrels per day from this month even as global crude supplies were in a structural deficit.

Oil bulls’ support for OPEC+ isn’t surprising as they typically support every supply crunch — real or artificial. But many are also hoping inflation would cool enough for the U.S. Federal Reserve to step away from the jumbo-sized rate hikes it has been doing since March. 

“I’ve been saying this for a while and I’ll say it again: If oil goes well beyond $100, how in the world would inflation go down meaningfully given the energy input in almost everything we consume?” said John Kilduff, partner at New York energy hedge fund Again Capital. “You don’t need a Harvard degree in economics to ask that question.”

Latest comments

Let me predict next week’s report : Draw. And the following: Build. Repeat.
I thought our SOR were depleted. How can we have a surplus?
Looks like OPEC+ was right to cut production in November and may as well cut production again in December to balance the supply for the slowing economy. The price of oil will probably just go sideways for years, fluctuating between 85 and 95 depending on who says what.
Last week there was a 6.5M bbl drawdown,oil price up 4.5 % and stocks didn't move One Inch. This week there was a 5.7M bbl, increase,  oil price down 3.8%, and oil stocks down 8 to 15%.! Market Manipulation !
that means oil stocks are overpriced. hard to go up, easy to drop. it went up a lot since covid oil price drop. look at charts of Bp, Chevron, Exxon. I got rid of all of them when oil went at $110
Interesting ... so few "Brandon" comments today. LOL :)
Or rather, NONE here.
Don't be silly. The fed wants to lower demand and 100 oil will help lower demand :)
You keep believing that, my friend.
rubbish... than what about other commodities and situation in July .. August ...inflations is inevitably going recession which politics wants to stops as they are afraid of loosing standard. it is not about oil it is about standard of living nobody wants to reduce. c' Mon oil is not causing it all, it is so US centric...
Typical bull argument that refuses to look at the energy-centric cost in our lives.
stock market this year is a nightmare. it doesn't seem like there are any safe stocks to invest in.
Oil stocks? Many are crowing about those.
try selling. it is 50% of all trades. Buy and hold is a strategy of the boomers. It was valid while they we were still stealing all the wealth. Those days are over
Yes, boomers ate the root to all evil, but paid for EVERYTHING in your life. The only project many young people have is CLIMATE.
89 brent is loading …
Can you guys tell me what you want high and low are bad for people just go to die
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