Key Takeaways
- December WTI crude oil futures rose 1.39%, closing at $83.00.
- December RBOB gasoline futures saw a modest increase of 0.46%.
- Geopolitical tensions and potential EU sanctions on Russian energy bolstered crude prices.
- Reports of reduced Russian crude exports and Ukrainian refinery attacks contributed to upward price movement.
- Shifting OPEC+ production forecasts and inventory data indicate a potential global oil surplus.
Crude Oil Prices Rebound Amidst Geopolitical Tensions
Crude oil prices recovered from earlier losses throughout Tuesday. This upward momentum was primarily driven by hawkish rhetoric from the European Union’s top diplomat, which fueled expectations of tighter sanctions on Russian energy supplies. Initial retreats in crude prices were linked to a broader selloff in the S&P 500, which hit a one-month low and triggered risk-off sentiment across asset markets. Furthermore, indications of weakness in the U.S. labor market, as reported by ADP showing employers shedding an average of 2,500 jobs per week in the four weeks ending November 1, negatively impacted economic growth projections and, consequently, energy demand.
EU Sanctions and Russian Supply Disruptions Drive Market Sentiment
The uptick in crude prices on Tuesday was further supported by comments from Kaja Kallas, the EU’s top diplomat. Her remarks, suggesting that Russia’s recent aggressions against the EU, including an explosion in Poland, should be considered acts of terrorism, bolstered speculation about an impending tightening of EU sanctions on Russian energy.
Additional support for oil prices comes from news of reduced crude exports from Russia. Data from Bloomberg indicated that Russia shipped an average of 3.36 million barrels per day (bpd) in the four weeks leading up to November 16, a decrease of 90,000 bpd from the previous week and the lowest volume in three months. This reduction is partly attributed to Ukraine’s targeted attacks on at least 28 Russian refineries over the past three months, which have exacerbated a fuel crunch within Russia and constrained its crude export capabilities. Ukraine’s actions have reportedly knocked out between 13% and 20% of Russia’s refining capacity by the end of October, curtailing production by as much as 1.1 million bpd. New sanctions imposed by the U.S. and EU on Russian oil companies, infrastructure, and tankers have also played a role in curbing Russian oil exports.
💡 The strengthening of the crude crack spread provides a bullish signal for crude oil. The spread reached a 19-month high on Tuesday, incentivizing refiners to increase their crude purchases to boost the production of gasoline and distillates.
Geopolitical Factors and Market Overlays
Underlying support for oil prices continues to stem from ongoing geopolitical risks associated with Russia. The seizure of an oil tanker in the Gulf of Oman by Iran last Friday, along with the U.S. military buildup for a potential operation against Venezuela, the world’s 12th-largest oil producer, also contribute to market uncertainty.
Shifting Global Oil Market Balances
In its report last Wednesday, OPEC revised its Q3 global oil market estimates from a deficit to a surplus, driven by higher-than-expected U.S. production and increased output from OPEC members themselves. OPEC now projects a global oil market surplus of 500,000 bpd for Q3, a significant shift from the previous month’s estimate of a 400,000 bpd deficit. The U.S. Energy Information Administration (EIA) also raised its 2025 U.S. crude production forecast to 13.59 million bpd, up from 13.53 million bpd.
At its November 2 meeting, OPEC+ announced plans to increase production by 137,000 bpd in December. However, the group intends to pause these production hikes in Q1 2026 due to 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 in its mid-October outlook. OPEC+ is working to restore all of the 2.2 million bpd production cut implemented in early 2024, with approximately 1.2 million bpd remaining. OPEC’s crude production in October rose by 50,000 bpd to 29.07 million bpd, marking the highest level in two and a half years.
📊 Vortexa reported on Monday 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. This represents the highest level since June 2024.
Inventory Expectations and Production Data
The consensus forecast anticipates a decline in Wednesday’s weekly EIA crude inventories by 2.0 million barrels, with gasoline supplies expected to fall by 1.0 million barrels.
📌 Last Thursday’s EIA report indicated that as of November 7, U.S. crude oil inventories were 4.1% below the seasonal 5-year average. Gasoline inventories were also down by 4.0% below the seasonal 5-year average, and distillate inventories were 7.9% below the 5-year seasonal average. Despite these lower inventory levels, U.S. crude oil production in the week ending November 7 rose by 1.5% week-over-week to a record high of 13.862 million bpd.
âš¡ 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 4-year low of 410 rigs recorded on August 1. Over the past two and a half years, the U.S. oil rig count has significantly decreased from its 5.5-year high of 627 rigs reported in December 2022.
Expert Summary
Crude oil and gasoline futures closed higher on Tuesday, buoyed by hawkish EU rhetoric and concerns over Russian energy supply disruptions. While geopolitical factors and tight inventories provided support, OPEC+ forecasts and rising U.S. production point towards a potential global oil surplus, creating a mixed outlook for the market.
