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Oil up 2% on US crude draw, Middle East risk after Gaza hospital blast

Published Oct 17, 2023 08:39PM ET Updated Oct 18, 2023 02:49PM ET
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Investing.com - After another uncertain start to a week, oil bulls got a reversal of fortunes again as crude prices jumped 2% Wednesday on government data showing a weekly drop in  both US crude and fuel stockpiles.

The bombing of a Gaza hospital filled with hundreds of Palestinians also repriced political risk into crude, with analysts citing as many uncertainties about the movement of oil from and around the Middle East versus the fact that the warring parties themselves weren’t major producers or shippers of the commodity.

New York-traded West Texas Intermediate, or WTI, crude for delivery in November settled up $1.66, or almost 2%, at $88.32 per barrel. The US crude benchmark dipped 0.9% on Monday and settled Tuesday flat after a near 6% climb last week.

London-traded Brent crude for the most-active December contract finished Wednesday’s session at $91.50, up $1.60, or 1.8%. It finished the first two days of this down by a net 1.1%. Last week, the global crude benchmark gained 7.5%.

Two wars supporting crude prices, in a season known for weak oil demand 

The Israel-Hamas war has given a new impetus to the oil trade in the fall, or autumn, season, which is typically known for weak oil demand. The 20-month old Ukraine war also remains supportive to crude market sentiment in a smaller way despite the sanctions on Russian oil.

“It is clear that now that we have two wars that are putting oil supplies at risk, which means European and Asian buyers will become more interested with US crude,” said Ed Moya, analyst at online trading platform OANDA.

The crude export component was what led to the supportive weekly inventory data released by the US Energy (NASDAQ:USEG) Information Administration, or EIA.

Crude stockpiles in the United States fell by 4.5 million barrels last week as exports accelerated from overseas market share gained by US oil firms, while supply cuts by OPEC+ resulted in lesser imports, a government report showed Wednesday.

Declines were also recorded in inventories of gasoline, the premier US fuel product, and distillates — a raw material for diesel and heating fuel, the Weekly Petroleum Status Report of the Energy Information Administration, or EIA, showed.

Typically at this time of year, demand for fuels is softer in the United States as fewer families do road trips, with children back in school or college. But with the US refining industry on one of its seasonal maintenance periods, larger-than-usual declines in fuel stocks aren’t unusual either with limited replenishments coming in.

US crude and fuel stockpiles down across the board

The US crude inventory balance fell by 4.491 million barrels during the week ended October 13, according to the EIA. That contrasted with a 10.176 million jump in the prior week to October 6, led largely by a sharp decline in exports.

In the latest week though, crude exports regained their mantle to reach 5.301 million barrels versus the prior daily rate of 3.067 million. 

Imports, meanwhile, fell 387,000 barrels per day, amounting to a weekly total of 2.709 million.

OPEC+ is a 23-nation alliance that groups the 13-member Saudi-led Organization of the Petroleum Exporting Countries with 10 independent oil producers that include Russia.

Moscow and Riyadh announced previously that they would hold back a joint 1.3 million barrels per day of their regular production till the end of the year, with 300,000 of that coming from Russia and the balance 1.0 million from the Saudis. The OPEC+ cutbacks have allowed US oil exports to make inroads into markets underserved by the Saudi-Russian cuts.

“Within this bullish story for oil is a bearish story of less market share growth for the Saudi and Russian crude versus US,” said John Kilduff, partner at New York energy hedge fund Again Capital. 

Russia’s unwillingness to commit to how much oil it may produce from November onwards is also raising questions on how well the OPEC+ collaboration is working out for Vladimir Putin’s government.

Moscow and Riyadh announced previously that they would hold back a joint 1.3 million barrels per day of their regular production till the end of the year, with 300,000 of that coming from Russia and the balance 1.0 million from the Saudis. But supply deficiencies within Russia and the Kremlin’s need to maximize oil revenues — despite a 30% gain in crude prices in the third quarter — could force Moscow to revisit those plans, say those in the know.

Russian Deputy Prime Minister Alexander Novak reinforced those suspicions when he told reporters on Tuesday that “it is still too early to talk about (an) OPEC+ decision in November”. To add to the trade’s consternation, Russia’s central bank has also announced that OPEC+, at its next meeting, will discuss a possible oil output increase in early 2024“ in the event that global oil deficit worsens”. 

Aside from the headline draw for US crude reported by the EIA for the week ended Oct. 13, the agency also noted a 758,000-barrel decline at the Cushing, Oklahoma delivery point for crude committed to exchange-traded futures contracts, on top of the previous week’s draw of 547,000. 

That was the lowest for Cushing storage levels since October 2014, historical EIA data showed. Oil held in Cushing has dropped sharply this year, prompting concerns that it might reach such critical lows to complicate operations at the storage hub.

On the fuel side, the EIA reported a gasoline inventory slide of 2.37 million barrels and distillates stockpile drop of 3.185 barrels. In the prior week, gasoline saw a 1.3134-million barrel build while distillates experienced a 1.837 million drop.

(Ambar Warrick contributed to this item)

Oil up 2% on US crude draw, Middle East risk after Gaza hospital blast
 

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Comments (5)
Corey DeLaplain
SniperSam Oct 18, 2023 3:00PM ET
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There was no hospital bombing by Israel, faulty Ham-ass rocket, landed in parking lot, deaths padded dramatically! You still trust the legacy media after the last 6 years????
Barani Krishnan
Barani Krishnan Oct 18, 2023 3:00PM ET
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You will notice that I did not cite any party as responsible, other than the cite blast itself, interchangeably described as bombing. If you wish, go to the site and report yourself. Otherwise, just . . . .
Corey DeLaplain
SniperSam Oct 18, 2023 3:00PM ET
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This wasn't directed at your Barani, it was directed to one of the comments and anyone reading the comments in general.
Barry Nickerson
Subbuilder Oct 18, 2023 6:55AM ET
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Ambar Warrick, answer this....Why does WTI crude go up in price along with Brent crude??  Brent is a superior product.  This could make a nice article.
Barani Krishnan
Barani Krishnan Oct 18, 2023 6:55AM ET
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Barry, for the same reason that gasoline and HO often rise together. Product grouping, though they tend to decouple at times.
Barry Nickerson
Subbuilder Oct 18, 2023 6:55AM ET
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Barani Krishnan Thank you.   I remembered incorrectly (backwards) where WTI is actually the better oil.
Maximus Maximus
Maximus Maximus Oct 17, 2023 11:45PM ET
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enough now! israel just killed 500 people bombing a gaza hospital, and have killed around twice as many palestinians as there have been israeli deaths...
Maximus Maximus
Maximus Maximus Oct 17, 2023 11:45PM ET
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..even for the most bloodthirsty, that should be enough death...
Luis Rodriguez
Luis Rodriguez Oct 17, 2023 11:45PM ET
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Middle East people dont touch their hearts when at war is always being like that so was Japan in the second world this is not going to de-escalate :
Maximus Maximus
Maximus Maximus Oct 17, 2023 11:45PM ET
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bineet you really don't get it do you..? how many more children should die before you are satisfied then? how would you feel if it was your own child bombed to shreds? this war has to stop.
Gary Offill
Gary Offill Oct 17, 2023 10:16PM ET
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Israel/hamas "tensions" has no impact on supply and demand. Just and excuse for the oil traders to profits at the expense of human lives.
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john richards
john richards Oct 17, 2023 10:16PM ET
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Just a reason to play dm and not blame h4m8s
Gary Offill
Gary Offill Oct 17, 2023 10:16PM ET
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john richards  Its called speculation.
Gary Offill
Gary Offill Oct 17, 2023 10:16PM ET
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john richards  Just a reason to make money off of death and destruction. You have blood on your hands thief.
Bilal ch
Bilal ch Oct 17, 2023 10:16PM ET
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If you want to trade with me I give U good returns grunted
Benjamin USA
Benjamin USA Oct 17, 2023 10:16PM ET
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Gary Offill speculation of what?
CURP Online
CURP Online Oct 17, 2023 9:05PM ET
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Tension? Every news report says Isreal has declared was and currently engaged in a military campaign.
 
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