At a Glance
- Crude oil and gasoline futures experienced slight downturns, influenced by broader market sentiment and labor market indicators.
- A reduction in Russian crude exports, due to Ukrainian refinery attacks and sanctions, provides underlying support for oil prices.
- Geopolitical tensions, including incidents in the Gulf of Oman and potential actions against Venezuela, add to market unease.
- Despite recent OPEC+ adjustments and rising U.S. production, global oil inventories remain below seasonal averages.
- The active U.S. oil rig count has seen a modest increase, though it remains significantly below historical highs.
Market Movements and Influencing Factors
December WTI crude oil futures saw a minor decline of -0.04 (-0.07%), while December RBOB gasoline futures closed lower by -0.0246 (-1.24%). These movements occurred amidst a broader selloff in the S&P 500, which reached a one-month low, triggering a risk-off sentiment across asset markets. Additionally, indications of weakness in the U.S. labor market, evidenced by ADP reporting that U.S. employees shed an average of 2,500 jobs per week in the four weeks ending November 1, are seen as negative for economic growth and, consequently, energy demand.
⚡ On the supportive side, oil prices are benefiting from reports of reduced crude exports from Russia. Data indicates that Russia shipped approximately 3.36 million barrels per day (bpd) of crude in the four weeks leading up to November 16, a decrease of 90,000 bpd from the previous week and the lowest figure in three months. This reduction is partly due to Ukrainian attacks on at least 28 Russian refineries over the past three months, which have disrupted Russia’s refining capacity, impacting as much as 1.1 million bpd of production, and have also constrained crude export capabilities. New U.S. and EU sanctions targeting Russian oil companies, infrastructure, and tankers have further compounded these export limitations.
Market Dynamics and Geopolitical Considerations
The strength observed in the crude crack spread, which reached a 19-month high, is a positive indicator for crude oil prices. This widening spread incentivizes refiners to increase their crude purchases to produce more gasoline and distillates. This suggests a strong demand for refined products relative to crude.
📍 Underlying support for oil prices also stems from ongoing geopolitical risks. These include the recent seizure of an oil tanker in the Gulf of Oman by Iran and the U.S. military buildup associated with a potential operation against Venezuela, a significant oil-producing nation.
Global Oil Supply and Demand Forecasts
OPEC recently revised its Q3 global oil market estimates, shifting from projecting a deficit to anticipating a surplus. This adjustment reflects higher-than-expected U.S. production and increased crude output from OPEC members. The organization now forecasts a surplus of 500,000 bpd in Q3, a contrast to the previously estimated deficit of 400,000 bpd. Furthermore, the Energy Information Administration (EIA) has raised its 2025 U.S. crude production forecast to 13.59 million bpd from 13.53 million bpd.
📊 In its November 2 meeting, OPEC+ announced plans to increase production by 137,000 bpd in December, followed by a pause in production hikes during Q1 2026, citing the emerging global oil surplus. The International Energy Agency (IEA) had previously forecasted a record global oil surplus of 4.0 million bpd for 2026. OPEC+ aims to recoup the 2.2 million bpd production cut implemented earlier in 2024 but still has 1.2 million bpd of production to restore. OPEC’s crude production in October rose by 50,000 bpd to 29.07 million bpd, marking a 2.5-year high.
Inventory Levels and Production Trends
Vortexa reported that crude oil stored on tankers that have been stationary for at least seven days increased by 1.1% week-over-week to 103.41 million barrels in the week ending November 14, the highest level seen since June 2024. This indicates a potential buildup of stored crude.
💡 The EIA report released last Thursday revealed that U.S. crude oil inventories as of November 7 were 4.1% below the seasonal five-year average. Similarly, gasoline inventories were 4.0% below the seasonal average, and distillate inventories were 7.9% below the five-year seasonal average. In contrast, U.S. crude oil production surged by 1.5% week-over-week to a record high of 13.862 million bpd in the week ending November 7.
📈 Baker Hughes reported last Friday that the number of active U.S. oil rigs increased by 3 to 417 in the week ending November 14. This figure is modestly above the four-year low of 410 rigs recorded on August 1. Over the past two and a half years, the number of U.S. oil rigs has seen a significant decrease from the 5.5-year high of 627 rigs reported in December 2022.
Expert Summary
Oil markets are navigating a complex landscape influenced by macroeconomic factors like a weakening labor market and broader market risk sentiment. While geopolitical events and disruptions to Russian exports offer price support, concerns about a potential global oil surplus and increasing U.S. production are creating downward pressure.
