Quick Summary
- Crude oil and gasoline futures saw gains on Monday, influenced by dollar weakness and optimism surrounding potential U.S. government reopening.
- Positive demand indicators from China and geopolitical support from potential U.S. action in Venezuela offered underlying strength to oil prices.
- However, concerns about a global oil surplus, signaled by OPEC+ production plans and IEA forecasts, and reduced Russian exports due to Ukrainian attacks and sanctions, present bearish pressures.
- U.S. crude oil and gasoline inventories remain below their 5-year seasonal averages, while production is at record highs, indicating a complex supply-demand picture.
Market Movements on Monday
December WTI crude oil futures closed Monday with a gain of +0.38 (0.64%), while December RBOB gasoline futures also saw an increase, settling up +0.0308 (1.59%).
Both crude oil and gasoline prices experienced an upward trend on Monday. A weaker U.S. dollar provided support for crude prices. Additionally, crude oil prices rose in tandem with stock market performance, fueled by speculation that the United States was nearing a government reopening. Such an event would typically bolster economic growth and, consequently, energy demand.
Factors Influencing Market Sentiment
The positive market sentiment was further boosted by a bipartisan move in the U.S. Senate, where eight Senate Democrats joined Republicans to advance a bill aimed at reopening the government. This development improved overall market sentiment, contributing to a risk-on environment across various asset classes.
đź’ˇ Demand from China, the world’s second-largest crude consumer, continues to be a supportive factor for oil prices. Recent data indicated that China’s crude oil imports for January-October rose by 3.1% year-over-year, reaching 471 million metric tons.
⚡ Conversely, concerns regarding future energy demand cast a bearish shadow on oil prices. Saudi Arabia’s decision last Thursday to lower the price of its main crude grade for Asian markets to an 11-month low suggests potential weakening demand expectations.
đź“Ś Geopolitical developments also played a role, with oil prices finding support in reports suggesting that the U.S. military might be preparing for potential strikes in Venezuela, a significant oil-producing nation.
OPEC+ and IEA Perspectives on Supply
Global Oil Supply Outlook
At its November 2 meeting, OPEC+ announced plans to increase production by 137,000 barrels per day in December. However, the group intends to pause these production hikes in the first quarter of 2026, citing the emergence of a global oil surplus. The International Energy Agency (IEA) had previously forecasted a record global oil surplus of 4.0 million barrels per day for 2026 in its mid-October report.
OPEC+ aims to restore the full 2.2 million barrels per day production cut implemented in early 2024 but still has 1.2 million barrels per day of production to bring back online. OPEC’s crude production in October increased by 50,000 barrels per day to 29.07 million barrels per day, marking the highest level in two and a half years.
Impact of Russian Exports and Sanctions
Reduced crude oil exports from Russia are also contributing to upward support for oil prices. Ukraine has targeted at least 28 Russian refineries over the past three months, intensifying a fuel crunch within Russia and limiting its crude export capabilities. Drone and missile attacks by Ukraine on Russian refineries and oil export terminals curbed Russia’s total seaborne fuel shipments to 1.88 million barrels per day in the first ten days of October, the lowest average in over 3.25 years. These attacks have impaired between 13% to 20% of Russia’s refining capacity by the end of October, potentially reducing production by as much as 1.1 million barrels per day.
Furthermore, new sanctions imposed by the U.S. and the EU on Russian oil companies, infrastructure, and tankers have also constrained Russian oil exports.
đź“Š Vortexa reported on Monday that crude oil stored on tankers that have been stationary for at least seven days increased by 11% week-over-week, reaching 95.18 million barrels in the week ending November 7.
U.S. Inventory Levels and Production
The Energy Information Administration (EIA) report from last Wednesday indicated that as of October 31, U.S. crude oil inventories were 5.3% below the seasonal 5-year average. Gasoline inventories were 4.3% below the seasonal 5-year average, and distillate inventories were 8.8% below the 5-year seasonal average.
In the week ending October 31, U.S. crude oil production rose by 0.1% week-over-week to a record high of 13.651 million barrels per day.
đź“Ť Baker Hughes reported last Friday that the number of active U.S. oil rigs remained unchanged at 414 in the week ending November 7. This figure is modestly above the 4-year low of 410 rigs recorded on August 1. In the past 2.5 years, the number of active U.S. oil rigs has seen a significant decline from a 5.5-year high of 627 rigs reported in December 2022.
Expert Summary
Monday saw gains in crude oil and gasoline futures, supported by a weaker dollar and positive sentiment regarding potential U.S. government reopening. While demand from China and geopolitical factors provided some upward momentum, broader concerns about global oil surplus and the impact of sanctions on Russian exports present significant counter-pressures. The U.S. inventory data and record production levels reflect a complex and dynamic market.
