Oil futures: Prices rebound as focus turns to looming diesel crunch

Quantum Commodity Intelligence - Crude oil futures Thursday were climbing higher having earlier tested fresh weekly lows which came following a rash of downgrades to the global demand outlook, as focus also returned to the supply side, including a potential crunch in diesel supplies.

Front-month December ICE Brent futures were trading at $94.48/b (1710 GMT), compared to the day's range of $91.08-94.69/b Wednesday's settle of $92.45/b.

At the same time, Nov22 NYMEX WTI was trading $89.22/b versus Wednesday's settle of $87.27/b.

Oil prices rebounded as the proposed price cap on Russian crude came back into focus, while the growing spat between the US and Saudi added to market uncertainty.

Diesel and gasoline shortages in northwest Europe were also underpinning refined product prices after a wave of refinery shutdowns saw premiums for physical barrels rocket.

Both crude benchmarks, however, were around 3.5% lower from last Friday's settlement, wiping out around 25% of the previous week's OPEC-led gains.   

Markets shrugged off the sharp US crude stocks build reported by the EIA, instead focussing on falling diesel stocks. The API also reported late Wednesday that US commercial crude inventories increased by 7.054 million barrels last week. Gasoline stocks were up 2.1 million barrels, while distillate inventories fell by 4.56 million barrels.

Markets were wobbled at one point as the US Consumer Price Index rose 8.2% in the year through September, another stubbornly high result that fuelled further speculation of a steep rate rise as the Dollar Index soared back towards 114 points before retreating back to under 113 points.. 

Demand

Weak economic data and demand downgrades had also weighed heavily on markets heading into the second half of the week, including OPEC's downwards adjustment to its global oil demand growth forecast for both this year and 2023, responding to a deteriorating economic outlook.

The producer alliance said in its monthly report demand for oil will increase by 2.64 bpd this calendar year, or 2.7%, down some 460,000 bpd from the previous forecast.

Meanwhile, the OPEC+ decision to cut output has driven up prices and could push the global economy into recession, the International Energy Agency said Thursday.

The US Energy Information Administration (EIA) now expects global oil production for 2023 to average 100.7 million bpd, down some 600,000 bpd from the previous month's forecast.

Standard Chartered also said it no longer expects next year's global oil demand to surpass the all-time high of 2019, downgrading its demand growth forecast along with its US GDP outlook. 

The bank now sees 2023 oil demand growth at 1.26 million bpd, which represents a reduction of 900,000 bpd since the beginning of this year.