[HOUSTON] Oil prices steadied on Tuesday (Oct 7) as investors weighed a smaller-than-expected increase to the Organization of the Petroleum Exporting Countries plus Russia (Opec+) output in November against signs of a potential supply glut.
Brent crude futures settled down 2 US cents, or 0.03 per cent, to US$65.45 a barrel. US West Texas Intermediate crude was up 4 US cents, or 0.06 per cent, to US$61.73. Both contracts settled more than 1 per cent up in the previous session after Opec+ and some smaller producers, together known as Opec+, decided to increase collective oil production by 137,000 barrels per day, starting in November.
The move was in contrast to market expectations for a more aggressive increase, a sign that the group remains cautious in light of predictions for a global supply surplus in the fourth quarter as well as next year, said ING analysts.
Market sentiment remains subdued, in particular after Saudi Arabia opted to keep the official selling price of its flagship crude to Asia unchanged, defying analyst expectations for an increase, StoneX analyst Alex Hodes said in a note on Tuesday. The Abu Dhabi National Oil Company has set the November official selling price of its benchmark Murban crude at US$70.22 a barrel, it said on Tuesday, up from October’s OSP of US$70.10.
On the demand side, India’s fuel demand rose 7 per cent year on year in September, according to data from the Petroleum Planning and Analysis Cell of the country’s Oil Ministry. On the supply side, US oil production is expected to hit a larger record of 13.53 million bpd this year, up from a prior forecast of 13.44 million bpd, the Energy Information Administration said on Tuesday.
Global oil inventories are also expected to rise through next year as non-Opec+ countries lead oil output growth, according to the EIA, putting significant downward pressure on commodity prices in the months ahead.
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JPMorgan said global oil inventories, including crude stored on water, have risen every week in September, adding 123 million barrels during the month. In the US, crude stocks rose while petrol and distillate inventories fell last week, market sources said, citing American Petroleum Institute figures on Tuesday.
Crude stocks rose by 2.8 million barrels in the week ended Oct 3, the sources said on condition of anonymity.
Petrol inventories fell by 1.3 million barrels, while distillate inventories dropped by 1.8 million barrels, the sources said. China is building oil reserve sites at a rapid clip as part of a campaign to boost stockpiles, according to public data, traders and industry experts.
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Geopolitical factors have kept a floor under prices, with conflict between Russia and Ukraine affecting energy assets and creating uncertainty over Russian crude supply. Russia’s Kirishi oil refinery halted its most productive distillation unit after a drone attack and subsequent fire on Oct 4, with recovery likely to take about a month, two industry sources said on Monday. REUTERS
