Oil prices saw an increase on Thursday, building on the previous day’s gains, fueled by positive sentiment regarding U.S. fuel demand following an unexpected decline in both crude and gasoline inventories. Additionally, reports suggesting that OPEC+ might postpone a planned output increase provided further support.
By 05:05 GMT, Brent crude futures were up by 47 cents, or 0.65 percent, reaching $73.02 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures, which are due to expire later in the day, rose by 43 cents, or 0.63 percent, to $69.04 per barrel. Both contracts had surged over 2 percent on Wednesday, recovering from a drop of more than 6 percent earlier in the week as fears of a broader conflict in the Middle East eased.
Unexpected drop in U.S. inventories
According to the Energy Information Administration, U.S. gasoline stockpiles unexpectedly fell to a two-year low during the week ending October 25, driven by heightened demand. Crude inventories also experienced an unanticipated decline due to a reduction in imports.
OPEC+ considers delaying production increase
Reuters reported that OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, might delay a planned oil production increase scheduled for December by a month or longer due to concerns about weak oil demand and rising supply. The group is set to increase output by 180,000 barrels per day (bpd) in December, having already postponed a previous increase from October in response to falling prices. A decision regarding this potential delay could occur as soon as next week, according to two sources within OPEC+. The group is scheduled to convene on December 1 to determine its next policy steps.
China’s manufacturing activity expands
In China, the world’s largest oil importer, manufacturing activity expanded in October for the first time in six months, indicating that recent stimulus measures are beginning to take effect. Markets are closely monitoring the results of the U.S. presidential election on November 5, along with further details concerning China’s economic stimulus efforts. Reports indicate that China could approve the issuance of over 10 trillion yuan ($1.4 trillion) in debt during its parliamentary meeting from November 4 to 8.
Market reactions to inventory declines
On Wednesday, oil prices rebounded from recent declines, as industry data highlighted an unexpected drop in U.S. inventories, while the ongoing Middle East conflict remained a key concern. Investors are also looking forward to a series of important economic reports and central bank meetings in major economies, which are expected to impact oil demand forecasts.
Futures performance amid geopolitical tensions
By 00:11 ET (04:11 GMT), Brent oil futures for December delivery had risen by 0.5 percent to $71.50 per barrel, while West Texas Intermediate (WTI) crude futures increased by 0.6 percent to $67.63 per barrel. Earlier in the week, both contracts had experienced a sharp decline after a less aggressive strike by Israel against Iran eased some concerns over a significant escalation in the Middle East.
API data shows inventory decline
Data from the American Petroleum Institute (API) revealed that U.S. oil inventories fell by 0.57 million barrels last week, contrasting with expectations for a 2.3 million barrel increase. This trend usually indicates a similar outcome in the official inventory data, which is set to be released later on Wednesday, providing some relief to oil markets by suggesting that supplies remain somewhat constrained in the world’s largest fuel consumer.
Anticipated moderation in U.S. oil demand
Nonetheless, U.S. oil demand is expected to decrease in the coming months as the winter season typically results in reduced travel. Additionally, ongoing economic pressures from persistent inflation and high interest rates are anticipated to negatively impact demand.
Market pressures and OPEC+ outlook
Vijay Valecha, chief investment officer at Century Financial, noted that oil markets are under pressure as attention returns to weak fundamentals, including low demand from China and sufficient supply, particularly with the diminishing risks associated with the Middle East conflict. He mentioned that traders are eagerly anticipating OPEC+’s production plans for December and possible stimulus measures arising from China’s legislative session. Additionally, he pointed out that U.S. growth and employment data are being closely examined, as they may provide valuable insights into the Federal Reserve’s future decisions and the broader implications of the upcoming U.S. elections.
Political uncertainty ahead of U.S. elections
The upcoming presidential elections add a significant layer of uncertainty to the markets, as the results will shape U.S. policy for the next four years. Donald Trump and Kamala Harris are gearing up for a competitive race, with both candidates advocating for increased U.S. oil production as part of their platforms.
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