Key Takeaways
- Crude oil and gasoline futures experienced declines on Thursday, erasing earlier gains.
- Geopolitical tensions and potential peace talks in Ukraine influenced crude oil prices, creating market uncertainty.
- Supply-side factors, including reduced Russian exports and OPEC+ production adjustments, continue to shape the oil market.
- U.S. crude oil and gasoline inventories remain below seasonal averages, providing some underlying support.
Market Performance
December WTI crude oil futures settled lower on Thursday, down 0.30% (0.50%), while December RBOB gasoline futures also closed down, falling 0.0137% (0.71%). Both commodities saw their early-day rallies evaporate, with gasoline reaching a two-week low.
Geopolitical Influences on Oil Prices
💡 Crude oil prices faced downward pressure on Thursday following statements from Ukrainian President Zelenskiy indicating a willingness to explore peace plans. The prospect of a resolution to the conflict could potentially ease current sanctions on Russian energy exports and increase global oil supplies, contributing to market volatility.
⚡ A broader risk-off sentiment in financial markets, triggered by a sharp reversal in stock prices, also weighed on crude oil. Investors moved away from riskier assets, impacting commodity prices.
✅ Earlier in the day, crude oil had seen some upward movement, supported by a weaker U.S. dollar and anticipation of new sanctions on Russian energy giantsRosneft PJSC and Lukoil PJSC, which were set to take effect. These sanctions were expected to further tighten Russian oil supplies.
Shifting Supply Dynamics
📊 Russia’s oil export capabilities have been significantly challenged. Data from Vortexa indicated that Russia’s oil product shipments fell to 1.7 million barrels per day in the first half of November, marking the lowest level in over three years. This reduction is partly attributed to Ukrainian attacks on Russian refineries, which have crippled a substantial portion of Russia’s refining capacity. By the end of October, Ukraine had reportedly affected 13% to 20% of Russia’s refining capacity, potentially curtailing production by up to 1.1 million barrels per day. Additionally, new sanctions from the U.S. and EU targeting Russian oil companies, infrastructure, and tankers have further hampered the country’s export operations.
📌 Despite the immediate price drop, underlying support for oil prices persists due to ongoing geopolitical risks. These include tensions related to Iran’s seizure of an oil tanker in the Gulf of Oman and military buildups for a potential operation in Venezuela, a significant oil-producing nation.
OPEC+ and Global Supply Forecasts
💡 OPEC recently revised its global oil market outlook for the third quarter, shifting from an expected deficit to a surplus. This adjustment is attributed to higher-than-anticipated U.S. production and increased output from OPEC members. The organization now forecasts a surplus of 500,000 barrels per day for Q3, contrasting with its previous estimate of a 400,000 barrels per day deficit. Concurrently, the EIA has raised its 2025 U.S. crude production forecast to 13.59 million barrels per day, up from 13.53 million barrels per day previously.
📍 OPEC+ announced at its early November meeting that while members would increase production by 137,000 barrels per day in December, production hikes would be paused in the first quarter of 2026. This decision reflects concerns about an emerging global oil surplus. Projections from the IEA in mid-October indicated a record global oil surplus of 4.0 million barrels per day is anticipated for 2026. OPEC+ is working to reinstate its earlier production cuts totaling 2.2 million barrels per day, with approximately 1.2 million barrels per day yet to be restored. OPEC’s crude production in October had risen by 50,000 barrels per day to 29.07 million barrels per day, the highest in two and a half years.
Inventory and Rig Count Data
📊 Crude oil stored on stationary tankers saw an increase of 1.1% week-over-week, reaching 103.41 million barrels in the week ending November 14. This marks the highest level observed since June.
✅ Recent EIA data for the week ending November 14 revealed that U.S. crude oil inventories were 5.0% below the five-year seasonal average. Gasoline inventories were 3.7% below the seasonal norm, and distillate inventories were 6.9% lower than the five-year average. U.S. crude oil production for the week decreased by 0.2% week-over-week to 13.834 million barrels per day, slightly down from the record high of 13.862 million barrels per day achieved the previous week.
💡 The number of active U.S. oil rigs increased by three to 417 in the week ending November 14. While this is slightly above the four-year low of 410 rigs seen in early August, it remains significantly below the high of 627 rigs reported in December 2022, indicating a substantial reduction in drilling activity over the past two and a half years.
Market Outlook
The oil market continues to navigate a complex landscape influenced by geopolitical events, evolving supply dynamics, and shifting demand forecasts. While recent data points to a potential surplus, geopolitical tensions and current inventory levels provide ongoing support for prices.
Market participants will be closely monitoring developments in Ukraine, OPEC+ decisions, and U.S. production trends in the coming weeks to gauge future price direction.
