U.S. West Texas Intermediate and international-benchmark Brent crude oil futures finished lower last week. The selling pressure was driven by another large increase in U.S. crude supplies and worries that OPEC+ might give into pressure from the United States and other major consumers to increase production. Traders also expressed concerns over an expected jump in crude oil production from Saudi Arabia.
Despite the mid-week price plunge, the markets had already started to recover after OPEC and its allies said no to the U.S. requests for more output. Friday’s October U.S. jobs report was also potentially bullish for oil prices.
US Crude Inventories Rise, While Gasoline Stockpiles Hit Four-Year Low – EIA
U.S. crude oil stockpiles rose more than expected, but gasoline inventories dwindled to a four-year low on steady demand, the Energy Information Administration (EIA) said on Wednesday.
Crude inventories rose by 3.3 million barrels in the week to October 29 to 434.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.2 million-barrel rise.
U.S. gasoline stocks fell by 1.5 million barrels in the week to 214.3 million barrels, the EIA said, putting those inventories at their lowest levels since November of 2017.
OPEC+ Dismisses US Call to Increase Output
OPEC and its allies agreed on Thursday to stick to their plan to raise oil output by 400,000 barrels per day (bpd) from December, ignoring calls from U.S. President Joe Biden for extra output to cool rising prices.
Top OPEC producer Saudi Arabia dismissed calls for speedier increases from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, collectively known as OPEC+, citing economic headwinds, Reuters reported.
Like they have done for more than a year, bullish traders have put their faith and confidence in OPEC and its allies working together to slowly bring the oil market back to balance.
There are two potential headwinds, however. The first is a new deal between Iran and major Western powers including the United States that could bring more supply to the market.
The news that Saudi Arabia’s oil output will soon surpass 10 million barrels per day for the first time since the outset of the COVID-19 pandemic also weighed on prices. The report, from Saudi-owned Al Arabiya TV, came after the nation, along with other OPEC countries, agreed to stick to previously agreed upon production increases.
Friday’s stronger-than-expected U.S. Non-Farm Payrolls report is also bullish for crude oil prices. It signals economic growth, which could translate into greater demand for gasoline and crude oil.