Oil Declines As Analysts, Journalists Argue That Bearishness Is Oversold

The IEA seems to be the leading culprit in fostering the negative attitude: File Image/Pixabay

Oil prices on Wednesday settled down but remained range bound due to U.S. crude stocks rising for the third straight week, and to worries about the Russia/Ukraine war intensifying.

Brent settled down 50 cents at $72.81 per barrel and West Texas Intermediate settled down 52 cents at $68.87.

U.S. crude inventories rose by 545,000 barrels last week, according to the Energy Information Administration, but the growth was significantly smaller than expected; the IEA also stated that gasoline inventories swelled 2.05 million barrels but crude stockpiles at the storage hub at Cushing, Oklahoma, fell by 140,000 barrels - providing investors with no clear idea of the true state of demand domestically.

As far as Eric Nuttall, a partner and senior portfolio manager at Ninepoint Partners, was concerned, sentiment was keeping benchmark crude prices lower than they should be.

He told Bloomberg on Wednesday that based on current inventory levels, oil is mispriced, even considering worries about the levels rising in 2025: "What we've seen is a complete breakdown between historical relationships, meaning if you look at where global oil inventories sit today, they're at their lowest levels on record.

"If you look at where the price should be relative to where inventories are, we're mispriced by about $12 to $13, so that is reflective of a profound sentiment challenge."

Nuttall went on to remark that the general consensus around global demand growth for oil next year is too bearish, and he expects prices to rise and trade within a $70 to $80 bend next year as demand grows in China and other markets.

He also praised the pick of oil and gas executive Chris Wright as the new U.S. energy secretary, stating, "As a Canadian I'm very envious… they now have a gentleman that is actually energy literate, who recognizes that there is no energy transition going on, and that depriving the majority of the planet from hydrocarbons keeps them in mass levels of poverty and energy scarcity."

Tsvetana Paraskova, a writer for OilPrice.com, seemed to agree with Nuttall that the high degree of bearishness infecting the market of late is unwarranted: in digging into global figures, she noted on Wednesday that "global inventories have been drawing down at a much larger rate than the International Energy Agency [which for months has been warning of large surpluses and waning demand] has expected……..global oil inventories plunged by 47.5 million barrels in September to their lowest level since January, led by a sharp draw in OECD oil products and non-OECD crude oil stocks."

Paraskova added, "OECD industry stocks fell by 36.4 million barrels to 2.8 billion barrels, which was 95.3 million barrels below the five-year average; provisional data suggest total global stocks decreased for a fifth consecutive month in October."