- “If we get a deal, I think that would be supportive, and if we don’t get a deal, I think that’s going to be somewhat punishing for prices.”
- In the United States, the seven-day moving average of new cases rose to 56,007, the highest level since August 5.
- “With Libyan supply ramping up, keeping a lid on overall OPEC supply is likely to continue to be a headache for the organization in the months ahead.”
Crude oil inventory data fell for two consecutive weeks. Crude oil ended its three-day downward trend, and closed higher, the highest close in nearly seven weeks. Meanwhile, the pending US economic stimulus package is expected to boost energy demand. Everyone, including the energy industry, is awaiting word on a deal.
The price of West Texas Light Crude Oil (WTI) for December delivery on the New York Mercantile Exchange rose 64 cents, to close at $41.70 per barrel, an increase of 1.6%.
The November WTI futures contract, which expired at the close on Tuesday, also rose 63 cents to close at $41.46 per barrel, an increase of 1.5%.
At the same time, the price of North Sea Brent crude oil futures for December delivery on London’s ICE European Futures Exchange also rose 54 cents, to close at $43.16 per barrel, an increase of 1.3%.
“If we get a deal, I think that would be supportive, and if we don’t get a deal, I think that’s going to be somewhat punishing for prices,” said John Kilduff, partner at Again Capital in New York.
With the increase in the number of new coronavirus infections in recent days, many European countries have imposed new restrictions on business activities and travel. It is also reported that in the United States, the seven-day moving average of new cases rose to 56,007, the highest level since August 5.
At the same time, the virtual committee meeting of OPEC and its allies (collectively referred to as “OPEC+”) on Monday “has little effect on quelling people’s concerns about weakening demand and adequate supply, because Russia and Saudi Arabia have not given any signs that they will reconsider the planned increase in January.”
The current OPEC+ agreement calls for a reduction of 7.7 million barrels per day before December, and then from January next year to 5.8 million barrels per day.
On Tuesday, the Joint Ministerial Monitoring Committee (JMMC) reiterated the committee’s commitment to the production reduction agreement, and stated that it “encourages” participating countries to increase efforts to compensate for “overproduction” in order to achieve market rebalancing.
An analyst at JBC Energy, a consulting company based in Vienna, wrote in a report:
“With the committee urging members to remain ‘vigilant and proactive,’ statements from oil ministers suggested no decision on January’s planned output increase were made, with the focus instead remaining for now on enforcing the agreed-upon compensatory cuts to ensure overall compliance with the existing deal.”
The report also pointed out, “with Libyan supply ramping up, keeping a lid on overall OPEC supply is likely to continue to be a headache for the organization in the months ahead,” they said. “By the time of the next JMMC meeting, scheduled for mid-November, some tough decisions may need to be made.”
In addition, investors are also waiting for US crude oil inventory data. The American Petroleum Institute (API) released last week’s crude oil inventory report later on Tuesday, while the Energy Information Administration (EIA) under the US Department of Energy will release its inventory report on Wednesday.
According to a survey by Standard & Poor’s Global Platts (S&P Global Platts), analysts on average expect US crude oil inventories to fall by 1.9 million barrels in the week ending October 26, a second consecutive week of decline.
Analysts also expect gasoline inventories to fall by 1.6 million barrels this week, and distillate (including diesel and heating oil) inventories to fall by 3 million barrels.