Although crude did bounce a little after news that the French has sent military jets to pound Islamic State in Syria, the oil price was generally seen lower.
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This view is misguided.
Oil price gains were limited, however, in a day that saw prices switch from positive to negative and back again, as traders sought to make sense of what the attacks and their aftermath might mean for oil supply and demand.
“We should normally in November until January be in a drawdown period for crude oil inventories, and that has not been the case in the last four weeks”, said Mike Dragosits, senior commodities analyst at TD Securities. WTI crude futures were up 50 cents at $41.17 a barrel.
Global oil prices moved modestly higher on Wednesday as traders weighed a small gain in USA inventories and a Federal Reserve report that supported expectations of a December interest rate hike.
Light, sweet crude for December delivery fell as low as $39.91 a barrel on the NY Mercantile Exchange, the lowest intraday level since August, then settled up 8 cents, or 0.2%, at $40.75 a barrel.
Still, the IEA predicts that supplies outside Opec will decline next year by the most since 1992 as low crude prices take their toll on the United States shale oil industry.
“The oversupply and surpluses are likely to continue well into next year, exerting continued downward pressure on prices”, the Centre for Strategic and global Studies said in its 2016 outlook on Wednesday.
The latest monthly report from the IEA said that stockpiles now stand at a record three billion barrels.
Also adding to a picture of a well-supplied market, Saudi Arabia raised its oil exports in September by 113,000 barrels per day (bpd) to 7.111 million bpd from 6.998 million bpd in the previous month, official data showed on Wednesday. “We had an oversold market, so it is a technical recovery as well”, Frank Klumpp, an oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg, told the news wire.
Oil prices have dropped more than 60% since June a year ago as high production and inventories have coincided with an economic slowdown in Asia, particularly in China but also Japan, which slipped back into recession in the third quarter.
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“This week’s data point is unlikely going to relieve the selling pressure on the oil markets with USA stocks at record levels for this time of year and knocking on the all-time high set earlier in the year”, said”, said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.
