Oil futures: Crude retreats as bearish indicators overshadow diesel squeeze
Quantum Commodity Intelligence - Crude oil futures Friday resumed the week's downward trend as negative indicators, including demand downgrades, high US inflation figures and a firmer dollar cancelled out the price rebound which came on concerns over a squeeze on European diesel supplies.
Front-month December ICE Brent futures were trading at $91.87/b (1910 GMT), compared to Thursday's settle of $94.57/b and down around 6% on the week.
At the same time, Nov22 NYMEX WTI was trading $85.80/b versus Thursday's settle of $89.11/b and last Friday's close of $92.64/b.
"The headline (EIA crude) draw was mainly driven by a massive SPR draw and many energy traders are concerned with the low diesel inventories heading into the winter," said Ed Moya, senior market analyst at brokerage Oanda.
US commercial crude stocks jumped 9.9 million barrels to 439.1 million barrels in the week to 7 October, although analysts said when taking into consideration SPR releases, total US crude oil inventories increased by just over 2 million bpd with the steep commercial build predominantly driven by a large decline in crude oil exports.
Oil prices also came off Friday as the Dollar Index rebounded back to around 113 points on growing expectations of further sharp rate hikes.
Slowing output and rising domestic demand caused US distillate stocks to drop to levels last seen in 2008, while jet fuel stocks tumbled to a 10-month low as demand rose, the EIA data showed.
Distillate stocks fell by nearly 5 million barrels in the week to 7 October, their sharpest weekly fall since early March and double what the market expected.
Inventories stood just above 106 million barrels, touching lows seen in May and nearing the sub-105m level hit during the global distillate shortage in 1H 2008.
Inflationary and subsequent interest rate hike fears also propelled the Dollar Index back above 113 points, making dollar-denominated oil imports more expensive.
"The Fed has admitted it is prepared to inflict economic pain to get a grip on inflation and today's report will ensure at least another 75 basis points rate hike in November and 50bp in December," ING said in a research note Friday.
Europe
A spate of refinery disruptions in Europe has also focused attention on the refined products sector, particularly as the tighter EU sanctions on Russian transport fuels loom ever closer.
Gasoline and diesel cash differentials rocketed during European trade on Thursday as unplanned maintenance at two of the continent's biggest refineries combined with ongoing strikes to complicate the supply situation.
Gasoline E5 differentials averaged $209.50/mt over November swaps on Thursday, up 27% day-on-day from an already eye-watering $164.25/mt.
Prompt diesel barges were further bid up to $145/mt over November gasoil futures, propelling Quantum's barge premium to a record $158.25/mt.
Diesel barges reached $77.70/b above ICE Brent at the London close – the second-highest print on record.
Meanwhile, Eurobob oxy E5 gasoline cracks topped $30/b for the first time since July.
However, oil prices retreated Friday after Exxon settled with workers as its Fos-sur-Mer refinery while those at Gravenchon decided to stop following pressure from the government. But the CGT union has yet to reach agreement with TotalEnergies at Gonfreville, Feyzin, and Donges refineries, roughly half of French refining capacity.
