Oil futures: Brent lower, surrenders modest weekly gains

Quantum Commodity Intelligence – Crude oil futures Wednesday were sliding lower, as oil benchmarks were unable to hold the week's modest gains after failing to establish a solid directional trend so far this week.

Front-month Jan23 ICE Brent futures were trading at $81.25/b (1910 GMT), compared to Tuesday's settle of $82.47/b.

At the same time Dec23 NYMEX WTI was trading $76.70/b, versus Tuesday's settle of $78.26/b.

Markets struggled to consolidate the early-week gains made after OPEC and IEA released reports that were relatively upbeat on the demand side, and while the latest inflation data from the US initially helped to cement the modest weekly gains it failed to stick. 

"Crude oil rallied following the inflation print. However, it gave up much of those gains late in the session as concerns over fundamentals came back to the fore," said ANZ commodity strategist Daniel Hynes, noting the IEA report had flagged a growth in oil supplies.

"Most of this (supply) growth is coming from the US. It also highlighted that refining margins slumped month on month in October, with most regions seeking a return to profitability levels seen late in Q2," added Hynes.

Last Friday, Jan23 Brent closed at $81.43/b, while Dec23 WTI settled at $77.17/b.

Inflation

Markets were relieved after month-on-month US inflation was unchanged from September, while annual CPI eased to 3.2%, versus 3.7% the previous month.

"October's softer-than-expected CPI print is an encouraging development for the FOMC and reinforces our view that the FOMC has ended its hiking cycle," said Wells Fargo in its latest investor note, but added, "we do not see the latest data as a game-changer for inflation's path ahead."

China continues to post mixed economic signals as retail sales, a measure of spending sentiment, jumped by 7.6% in October, a major improvement from the 5.5% annual growth in September.

However, this was offset by the beleaguered property sector, as figures revealed real estate investment slumped 9.3% in the first the 10 months of the year.

Market reaction to the latest data from the American Petroleum Institute was relatively neutral as the 1.335 million barrel rise in crude stocks was largely in line with expectations. Gasoline inventories nudged up 200,000 barrels following four successive weeks of draws, while distillate stocks dipped 1.136 million barrels.

This was followed by the EIA's weekly Petroleum Status Report, which revealed crude stocks rose by 17.5 million barrels during the two weeks to November 10 to reach 439.4 million barrels, its highest since early August and sharply narrowing its gap to year-ago levels.

Two weeks of EIA data were published Wednesday after reports were suspended last week due to a planned systems upgrade.