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Oil up as Bulls Starry-Eyed Over Record U.S. Exports That May be Fleeting

Commodities Oct 27, 2022 02:47PM ET
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By Barani Krishnan

Investing.com -- Oil bulls starry-eyed over last week’s record U.S. crude exports pushed the commodity’s prices up sharply again on Thursday as headline economic numbers for the third quarter also suggested America was doing better than thought.

A three-day run-up in oil now puts London’s Brent and New York’s West Texas Intermediate, or WTI, crude benchmarks up between 2% and 5% for the week. 

In Thursday's trading itself, Brent crude, the global benchmark for oil, settled up $1.27, or 1.3%, at $96.96 per barrel for its December delivery contract, extending Wednesday’s 2% rally.

WTI, the benchmark for U.S. crude, settled up $1.17, or 1.3%, at $89.08 a barrel for its December contract, extending the previous session’s gain of 3%.

But the swings in oil of late — that saw WTI jump 16% at the start of October, only to give back 7% the following week — were a caution that the volatility in crude prices was far from over.

Those familiar with the history of U.S. crude exports also point to instances where the numbers are exceedingly high in one week and surprisingly low in subsequent ones.

“I have read a lot of headlines on record exports of crude last week in the U.S. and quite frankly don’t believe it,” Scott Shelton, an energy futures broker at ICAP in Durham, North Carolina, said, referring to the shipment of 5.129 million barrels per day reported by the Energy Information Administration, or EIA, for the week ended Oct. 21.

Shelton, who typically makes positive comments on oil, said he was more convinced that last week’s exports were at around 4 million barrels per day.

“I assume a correction is coming,” Shelton said, referring to the EIA report for the current week to Oct. 28, which is due Nov. 2. “As for November exports expectations...they are significantly less than October as Europe has taken less barrels as can be seen by the cash markets’ weakness, which should cut exports by about 25% from October in my view — though a late surge can always come.”

Similarly, there were troubles with the U.S. economy despite its forecast-beating growth for the third quarter, said Ed Moya, analyst at online trading platform OANDA.

The U.S. economy turned positive for the first time in 2022 with a growth of 2.6% in the third quarter, after two prior quarters in the negative, the Commerce Department reported on Thursday. Economists had forecast a growth of 2.4% for the latest quarter. Oil prices are often closely aligned with the economy.

“The strong headline number is welcome news, but when you dig into the numbers it is clear that an economic slowdown is here,” said Moya, referring to the third quarter growth number. “The international trade component helped this quarter and that obviously won’t continue going forward. Consumer spending is softening and prices are coming down quickly. Business investment is clearly weakening.”   

Oil up as Bulls Starry-Eyed Over Record U.S. Exports That May be Fleeting
 

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Comments (4)
Rubbing Hands
Rubbing Hands Oct 27, 2022 4:17PM ET
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with dollar down it will probably be double next week
Casador Del Oso
Casador Del Oso Oct 27, 2022 4:11PM ET
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Thank you for an excellent article.
EL LA
EL LA Oct 27, 2022 3:32PM ET
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XLE train headed for 111 and we can hardly see the skyline, it's so full of stars! chooooo chooo!
Barani Krishnan
Barani Krishnan Oct 27, 2022 3:32PM ET
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Dollar headed back toward 120 next week. More starry, I'd say.
EL LA
EL LA Oct 27, 2022 3:32PM ET
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Barani Krishnan  ROW can't take it, already cried, "Uncle!"
Barani Krishnan
Barani Krishnan Oct 27, 2022 3:32PM ET
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EL LA  All in a day's play, mate. Have a good one! :)
First Last
First Last Oct 27, 2022 3:32PM ET
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Not understanding your skyline & stars metaphors ... shouldn't a skyline be more visible during a starry night than during an overcast night?
Andrew Ulferts
Andrew Ulferts Oct 27, 2022 3:24PM ET
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I can tell which articles are yours from the biased titles.
Barani Krishnan
Barani Krishnan Oct 27, 2022 3:24PM ET
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Well, let's see. Scott Shelton is a respected commentator who's 90% of the time bullish oil. Moya is also has street cred for his reading of the economy. Are you trying to tell me that these record exports are going to be a feature week after week (hence my description of "fleeting" in the headline)? Hardly, right? So, where's the bias. I'd say there's "balance" instead.
First Last
First Last Oct 27, 2022 3:24PM ET
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Barani Krishnan   With Russia exporting less, the US should be exporting more, at least as long as Russian aggression continues to keep Russian oil/gas out of global market.
Barani Krishnan
Barani Krishnan Oct 27, 2022 3:24PM ET
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First Last  I'm all for the US exporting more. What I'm against is the so-called (short) "bias" I am accused of, when all I'm trying to do is balance the perma-bulls on the other side. LOL
First Last
First Last Oct 27, 2022 3:24PM ET
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Barani Krishnan   Do you think US export going up or down is good for predicting oil price?
First Last
First Last Oct 27, 2022 3:24PM ET
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Barani Krishnan   Balance is good  ;-)
 
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