Oil futures: Crude extends losses, gas sinks on high supply, diesel tanks
Quantum Commodity Intelligence – Crude oil futures Thursday extended losses following the previous-session's crash that wiped more than 5% from outright values, while headline prices have now lost over 12% since the 2023 highs registered in late September.
Front-month Dec23 ICE Brent futures were trading at $85.19/b (1525 GMT), compared to the day's low of $84.06/b and Wednesday's settle of $85.81/b, having tested five-week lows with September gains now completely eroded.
Crude prices have been under strong downwards pressure for the past week, largely on concerns that the 'higher for longer' rate policy would cap demand growth going forward, but signs of a US demand slowdown accelerated the losses.
"Oil futures extended their losses in response to an EIA report that revealed a larger-than-expected increase in domestic gasoline inventories during the last week of September, suggesting that demand had dropped to the second-lowest level of the year," said Stephen Innes, managing partner SPI Asset Management.
Gasoline inventories soared by 6.5 million barrels or 2.9% to 2270 million barrels as of 29 September, tracking a 7% slide in implied US gasoline demand over the period to an eight-month low of 8 million bpd.
"Absolutely anemic gasoline demand as gasoline inventories surge nearly 275 million gallons in the last week," commented Patrick De Haan of GasBuddy, which tracks gasoline demand and retail prices.
In other commodities, European LSGO futures saw their biggest daily fall ($50/mt) in almost a year amid fears of a slowdown in the economy, the return of Russian barrels and lower gas prices.
TTF gas futures lost €2/MWh on the day on higher Norwegian supply and sustained milder European weather.
Margins
Gasoline margins had also collapsed through September as US states shifted to cheaper winter gasoline. RBOB-Brent cracks slumped to one-year lows this week of just over $7/b versus more than $20/b as recently as 15 September.
US commercially held crude inventories slipped 2.2 million barrels to 414 million barrels and a 9-month low, but did little to take focus away from gasoline and broader economic concerns.
Meanwhile, both Saudi Arabia and Russia reaffirmed additional cuts until the end of the year, but this was just reiterating a previous announcement so had no impact on prices, while talk of rising non-OPEC+ production has also weighed on outlook.
Crude benchmarks rebounded from the day's lows, with some commentators saying the selloff had been overdone, including Goldman Sachs.
"While a significant recovery in crude prices likely requires a recovery in gasoline margins, some stabilization in financial conditions, and evidence of stock draws, we expect all three of these drivers to play out," the US bank said in a note on Thursday.
Oil markets were also given a brief respite as analysts noted the weakness in yields has prompted the US dollar to ease back from recent highs, although the US bond market continues to drive currency movements.
"Until Central Bankers finally calls time on their 18-month rate-hiking cycle, market uncertainty will continue to weigh heavily on sentiment," said Phil Carr of the Gold & Silver Club.
