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Oil up on Global Demand Estimates, But U.S. Stockpiles Still Grow

CommoditiesOct 14, 2021 11:35AM ET
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© Reuters.

By Barani Krishnan

Investing.com - Oil prices resumed their upward trajectory on Thursday as market bulls rejoiced over the latest upgrade to global demand estimates while casting aside a third straight weekly build in U.S. crude stocks.

U.S. crude stockpiles rose by 6.09 million barrels in the week to October 8, following through with the 2.35-million and 4.58-million builds in the previous two weeks, the Energy Information Administration said in its Weekly Petroleum Status Report. 

The market’s attention was instead on the upgrade to global oil consumption forecasts by the Paris-based International Energy Agency.

The IEA said it expected world demand for oil to rise to 99.6 million barrels per day in 2022, up 3.3 million bpd from its previous estimate.

A lack of natural gas, LNG and coal could keep the oil market in deficit until at least the end of 2021, the agency said, concurring with popular estimates.

The global squeeze in energy supplies has forced a shift to oil, which might increase demand for crude by 500,000 bpd, the IEA added.

Oil prices jumped on that and barely gave up ground when the U.S. inventory numbers were reported later by the Washington-based EIA.

U.S. crude’s West Texas Intermediate benchmark settled up 87 cents, or 1.1%, at $81.31 per barrel. WTI hit seven year-highs above $82 on Monday and has gained 68% this year from a combination of output cuts by the Organization of the Petroleum Exporting Countries and its allies, a 23-nation alliance known as OPEC+. 

London-traded Brent crude, the global benchmark for oil, was at $84.12 by 2:40 PM ET (18:40 GMT), up 94 cents, or 1.1%. Brent is up 62% on the year and rose to almost $85 on Monday.

“Given the prevailing market sentiment, it’s not surprising that the IEA projection got prioritized over the EIA numbers,” said John  Kilduff, founding partner at New York energy hedge fund Again Capital. “It will probably have to take a lot more builds on the U.S. front to make a dent on the market’s bull psyche.”

Higher economic activity amid a sheer drop in global coronavirus cases has helped oil consumption spike in recent weeks as more motorists hit the road and governments loosened up activity curtailed for months by the pandemic.

The higher energy usage showed up in the weekly inventory dataset released by the EIA on Thursday. 

Gasoline stockpiles fell by 1.96 million barrels last week versus forecasts for a build of 3.26 million while distillate inventories slipped by 24,000 barrels against expectations for a 396,000-barrel decline.

Despite continuous drops in product inventories, crude builds have been larger lately, probably because refining activity was lagging usual trends due to higher WTI prices now, said Kilduff.

“This might surprise some but crude refiners are also price-sensitive and WTI at seven-year highs isn't exactly where buyers want it to be,” said Kilduff, who noted that refinery runs for last week were at 86.7%, well below the 90% and above typical for this time of year.

On the flip side, Russia’s Deputy Prime Minister Alexander Novak said on Thursday that Moscow had no issues ramping its oil production to meet projected demand.

Novak's stance could be in conflict with the OPEC+ decision not to go beyond the monthly 400,000 bpd increase the group had agreed to. 

OPEC+, interestingly, has Russia as the second biggest producer after Saudi Arabia. That said, Novak has not dissented with the alliance’s joint decisions since April 2020 as oil producers worked to restore prices destroyed by the pandemic.

Oil up on Global Demand Estimates, But U.S. Stockpiles Still Grow
 

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Comments (11)
jj mm
jj mm Oct 14, 2021 5:57PM ET
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Closing China that's all folks
KAMAL AHMED
KAMAL AHMED Oct 14, 2021 5:00PM ET
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Largest storage Cushing has declined heavily that may be the the reason crude oil moved northward.
Barani Krishnan
Barani Krishnan Oct 14, 2021 5:00PM ET
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Yes, but that's been a recurring theme. But stockpiles on the open market are also up 13 mln barrels over three weeks, and counting.
Ruby Caraballo
Ruby Caraballo Oct 14, 2021 3:53PM ET
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It is motgan stanley 90
Ruby Caraballo
Ruby Caraballo Oct 14, 2021 3:53PM ET
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Wow
Mojo Snake
Mojo Snake Oct 14, 2021 1:37PM ET
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There it is Morgan Stanley said 90 so it MUST be 90..... They saw the housing crash and the tech crash and the covid crash coming too.   So I trust them......
Barani Krishnan
Barani Krishnan Oct 14, 2021 1:37PM ET
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I see where you're going with this, Mojo. If it helps, we have Goldman Sachs' former Arjun Murti and his $200-oil call for posterity :)
Mojo Snake
Mojo Snake Oct 14, 2021 1:37PM ET
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Barani Krishnan  Wow they are definitely bold.... Thanks for the input.
Barani Krishnan
Barani Krishnan Oct 14, 2021 1:37PM ET
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Mojo Snake  That was from 2008. It helped light the fuse under the financial crisis then. Saudi Arabia's AbS is thumping his chest today for a "remarkable job" done. I'm pretty sure this will continue till it's overdone.
Mojo Snake
Mojo Snake Oct 14, 2021 1:37PM ET
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Barani Krishnan  Thanks for your insight I guess I will keep my hedge and maybe build it until the rug gets pulled, there has to be a breaking point.
Mojo Snake
Mojo Snake Oct 14, 2021 12:08PM ET
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That's it MM's make it nice and smooth I would hate to see the greedy bulls lose any money with a rug pull that is totally needed....
Mojo Snake
Mojo Snake Oct 14, 2021 11:20AM ET
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Yes it isn't the endless oil surplus that is the surprise here it would be a surprise if the price of oil actually went down because of negative data.   That would be the shocker.
perplexed76 .
perplexed76 . Oct 14, 2021 11:18AM ET
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disaster for oil "investors" but they will thing something tighten supply
Roger Miller
Roger Miller Oct 14, 2021 11:14AM ET
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The price of oil is obviously more influenced by the future effects of political supply destruction, and the inflationary effects of the Fed. then by actual demand. Bidenomics 101
Mojo Snake
Mojo Snake Oct 14, 2021 11:13AM ET
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Who doesn't expect this???  Really??
Val Lange
Val Lange Oct 14, 2021 11:10AM ET
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Well, oil will go down.
Ricardo Capitão
Ricardo Capitão Oct 14, 2021 11:10AM ET
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No so soon.
semih erbek
semih erbek Oct 14, 2021 11:10AM ET
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I dont think so.
Ahmad Khatib
Ahmad Khatib Oct 14, 2021 11:10AM ET
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buyy??
TEWODROS KELKLEW
TEWODROS KELKLEW Oct 14, 2021 11:10AM ET
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Ahmad Khatib for your car yes haha
 
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