Oil Inches to $91 on Expected Demand in U.S, China

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Oil Inches to $91 on Expected Demand in U.S, China

Oil Inches to $91 on Expected Demand in U.S, China

Oil prices jumped on Thursday on account of positive demand outlook in the United States and China despite ongoing tension in the Middle East. Growing tension in the Middle East continues to support oil prices, with Brent settling 1.78% higher at US$91.50 per barrel after an explosion at a hospital in Gaza.

While the explosion was quickly blamed on an Israeli strike, both Israel and the US Pentagon have since said that a militant group was responsible for the explosion.

The incident only adds to instability in the region and Iran has already called on Islamic oil producers to impose an oil embargo against Israel amid the wider conflict.

Israel is a relatively small oil importer, importing a little over 200Mbbls/d with the two largest suppliers being Kazakhstan and Azerbaijan at the moment.

“If we were to see a disruption to these flows, given the relatively small volumes, Israel should be able to quite easily find alternatives”, ING commodities analysts said in a note.

The oil market has demonstrated quite well since the Russia-Ukraine war how trade flows can adjust to trade restrictions, analysts added.

In a related development, US commercial crude oil inventories decreased by 1.1% during the week ending Oct. 13, according to data released by the Energy Information Administration (EIA) on Thursday.

Inventories fell by around 4.5 million barrels to 419.7 million barrels, compared to the American Petroleum Institute’s expectation of a fall of around 4.4 million barrels.

The data revealed that strategic petroleum reserves, which are excluded from commercial crude stocks, remained unchanged at 351.3 million barrels last week.

Meanwhile, gasoline inventories declined by about 2.4 million barrels to 223.3 million barrels over the same period. EIA data showed that US crude oil production decreased by 1,000 barrels per day (bpd) to around 13.6 million bpd during the week ending Oct. 13.

US crude oil imports also fell by 387,000 bpd to about 5.94 million bpd over the same period, while crude oil exports surged by 2.23 million bpd to approximately 5.3 million bpd.

In the Short-Term Energy Outlook (STEO) released on Oct. 11, the EIA predicted that crude oil output in the country would reach an average of 12.92 million bpd this year. Next year, crude oil output in the country is expected to reach 13.12 million bpd.

Chinese macro data released yesterday came in stronger than expected, whilst the oil numbers were also supportive with refineries in China processing a record 15.5MMbbls/d of crude oil over the September.

In addition, domestic demand remains robust coming in at around 15.2MMbbls/d, up 3% month on month and 5% higher year on year. Given these stronger numbers, domestic crude oil inventories fell at a rate of around 200Mbbls/d last month. Naira Devaluation Deepens Economic Crisis in Nigeria

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