Key Takeaways
- Despite reports indicating a potential oil surplus, crude oil prices saw a slight increase.
- US crude oil inventories rose significantly, reaching their highest level since June, primarily due to decreased exports.
- Global oil supply is projected to outpace demand growth in 2025 and 2026, according to the IEA.
- Elevated refinery margins and ongoing maintenance contribute to strong support for the middle distillate market.
Oil Prices Rise Amidst Surplus Concerns
Crude oil prices experienced an upward trend, closing nearly 0.5% higher. This occurred despite a bearish weekly report from the Energy Information Administration (EIA) and a monthly outlook from the International Energy Agency (IEA) highlighting expectations for a considerable oil surplus in 2026. Analysts Ewa Manthey and Warren Patterson of ING’s commodity team noted these developments.
US Crude Oil Inventories Surge
The EIA’s report revealed a substantial increase in U.S. crude oil inventories, climbing by 6.4 million barrels over the past week. This figure surpassed expectations and was considerably higher than the 1.3 million barrel increase reported by the API the previous day. Consequently, crude oil stocks now stand at their highest point since June. Seasonally, however, these inventory levels are at their lowest since 2014.
The primary driver for this inventory build was a significant decrease in exports, which fell by 1.55 million barrels per day week-over-week. For refined products, both gasoline and distillate inventories saw declines, with reductions of 945,000 barrels and 637,000 barrels, respectively. These inventory draws occurred even as refinery utilization rates increased by 3.4 percentage points to 89.4% in the same period.
đź’ˇ Refinery runs are anticipated to increase further as scheduled maintenance concludes. Additionally, healthy refinery margins are expected to support higher utilization rates in the coming weeks.
Global Oil Market Outlook: Supply vs. Demand
The IEA’s latest monthly report continues to paint a picture of a well-supplied global oil market. The agency forecasts that global oil supply will grow by 3.1 million barrels per day (b/d) in 2025 and 2.5 million b/d in 2026. In contrast, demand growth is predicted to be more moderate, with the IEA expecting an increase of just 790,000 b/d in 2025 and a further 770,000 b/d in 2026.
đź“Š Regarding global oil inventories, the IEA estimates that observed stocks surged by 77.7 million barrels in September, with a notable portion attributed to increased floating storage. Preliminary data suggests that global stocks continued to rise in October, again largely driven by floating storage.
Middle Distillate Market Shows Resilience
Despite a recent pullback from its peaks, the ICE gasoil crack remains elevated, trading above $30 per barrel. As the Northern Hemisphere heads deeper into winter and the refinery maintenance season, a combination of unplanned refinery outages, uncertainty surrounding Russian sanctions, and low stock levels has provided strong support for the middle distillate market.
đź“Ť Recent inventory data from Enterprise Singapore indicates a decrease of 119,000 barrels in onshore middle distillate stocks in the nation over the last week. In the Amsterdam-Rotterdam-Antwerp (ARA) region, gasoil stocks saw an increase of 87 kilotons week-over-week, reaching 2.29 million tons, according to Insights Global.
Expert Summary
The oil market is navigating a complex landscape, with rising U.S. inventories and forecasts of a global supply surplus contrasting with current price strength. Supported by seasonal factors and refinery dynamics, the middle distillate market remains robust despite broader market concerns.
