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Oil Market Headlines Kick the Dust Up

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Daily Settlement Prices
The oil market settled fractionally lower on Wednesday, and remains fraught with excitement / intensity / malaise (depending on your forward price view) on how the remaining weeks of the year will play out.  Despite the rather non-committal settles on Wednesday, the market did see two major macro inputs during the day, each of which caused a significant price reaction (one up and one down).  

 

The Department of Energy's (DOE) inventory report was fairly bearish, with builds in each of the major product categories (see below).  Just a few minutes after the data came out, however, a new "OPEC related" headline appeared, this one quoting Russian Oil Minister Alexander Novak, which stated he expects OPEC to announce a strong production cut at its November 30 meeting, and that Russia will gladly participate in such a cut.  These two different market factors seemingly contradicted each other, causing a fractious trading period in the late morning.  After the dust settled, the market traded pretty quietly in the afternoon and settled in similar fashion.

 

Oil had a major move upward on Tuesday (WTI posted its biggest single day gain since February) on bullish OPEC talk, though that momentum wasn't present early on Wednesday.  In fact, the market opened a little lower and was trending down heading up to the DOE data release.  The results of this week's DOE report were as follows: 


  • Crude Oil - build of 5.3 MMbbls (versus expected build of 1.5 MMbbls)
  • Gasoline - build of 0.7 MMbbls (versus expected draw of 0.4 MMbbls)
  • Distillates - build of 0.3 MMbbls (versus expected draw of 1.7 MMbbls)

High levels of imports affected each of these groups, including a fairly massive bump in gasoline imports.  This likely due to cargoes that were fixed a few weeks ago right after the Colonial Pipeline explosion, when the market was uncertain about East Coast gas supply.  The gasoline was loaded and on the way here when the pipeline was fixed, and thus all of this extra gasoline has arrived without the anticipated shortage.  Refineries are ramping up rates, post-Fall maintenance season, which should limit crude oil builds going forward but will also contribute to finished product builds.

As expected, prices dropped considerably right after the data came out, but 'five minutes' later the Russian / OPEC headline caused a swift reversal.  December WTI traded in a range of $1.25 after both data points came out.  With the official OPEC meeting now just two weeks away (November 30 in Vienna, Austria), expect to see more and more headlines appear (both bullish and bearish, depending on who is being quoted).  By noontime on Wednesday, the December WTI contract was essentially flat on the day and settled close to that (ultimately at $45.57, down 24-cents).  RBOB and Heating Oil posted losses of about a penny, though gasoline through the system (NYMEX and cash differentials) is weak.  


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