Oil futures: Prices rebound on falling US crude inventories, production
Quantum Commodity Intelligence - Crude oil futures Wednesday saw another choppy day of trading activity amid uncertainty over the short-term outlook, with a fall in US crude stocks and output reported by the EIA ultimately lifting prices into positive territory.
Front-month January ICE Brent futures were trading at $95.95/b (1905 GMT), compared to the day's low of $94.01/b and Tuesday's settle of $94.65/b.
At the same time, Dec22 NYMEX WTI was trading $89.65/b versus Tuesday's settle of $88.37/b, with a US 0.75% rate hike largely priced in ahead of the Fed announcement.
Commercial US crude oil stocks fell by over 3 million barrels in the final week of October even as exports slowed, while domestic oil production eased to a five-month low of 11.9 million bpd, which was enough to lift prices into the green.
At 436.8 million barrels, crude inventories were some 3% below the five-year average for this time of the year, the EIA also noted.
Prices also found support as geopolitical tensions were raised on reports that Saudi Arabia has shared intelligence with US officials that indicated Iran could be preparing for an imminent attack on the kingdom.
Oil markets had initially opened higher after Chinese equities rallied this week amid speculation that officials were examining scenarios to end or ease the country's zero-Covid policy that has stymied economic recovery in the world's second-largest economy this year.
However, the nation's Foreign Ministry said it was unaware of such a plan, while on the ground there was no sign of any such move, which led to prices easing.
For example, authorities in Guangzhou said they faced a "dire and complicated" outbreak as the number of Covid-19 cases rose sharply in the southern Chinese city.
The country as a whole reported a total of 498 local cases and 2,221 asymptomatic infections on Tuesday.
Outlook
As such, short- and medium-term outlook remains highly uncertain, with industry veterans attending this week's Adipec conference in Abu Dhabi divided on price direction.
Russell Hardy, CEO of Vitol, said oil prices could remain under pressure this winter, despite the expected shortfall in Russian supplies and moves by the OPEC+ group of producers to restrict production to prop up the price.
He said Vitol's estimates for oil demand in the fourth quarter were about 2 million bpd lower than earlier this year, reflecting weak demand in the aviation sector, the US gasoline market, and China.
"Our long-term view is still supportive of oil prices for the next five years," said Hardy. "However, we're fighting poor demand today and economic doom and gloom."
Goldman Sachs, however, reiterated its bullish outlook for crude Tuesday, maintaining a $115/b price target for Brent in the first quarter of 2023 but with "significant upside" from that level.
Jeff Currie, head of commodities research at Goldman Sachs, pointed to a halt in releases from the US Strategic Petroleum Reserve, upcoming EU sanctions on Russian crude due in December, and disappointing growth in US shale production.
"You have a relatively tight supply situation going into 2023 that we think will create significant upside," Jeff Currie told CNBC.
Markets were also underpinned after the American Petroleum Institute figures released late Tuesday revealed that US commercial crude inventories slumped by 6.53 million barrels last week, against expectations for a much smaller drop. Gasoline stocks were down 2.64 million barrels, while distillate inventories rose by 0.865 million barrels.
Meanwhile, tropical storm Lisa is expected to cross Central America and enter the southern Gulf of Mexico. Although forecasters give only a relatively small chance of reforming into a significant storm in the GoM, oil platforms operated by Pemex in the Bay of Campeche have been put on alert.
