Oil Ekes Out Modest Gains, But U.S. Election Could "Whipsaw" Prices

OPEC has also become a focus for jittery traders: File Image/Pixabay

The most ephemeral of bullish news – a drawdown in U.S. stockpiles – was said to be the driver of modest gains for crude on Wednesday, as investors also anticipated a decision from the Organization of the Petroleum Exporting Countries (OPEC) whether to delay a planned production increase.

By 1530 GMT, Brent gained $1.81 to $72.93 per barrel, while West Texas Intermediate rose $1.85 to $69.06.

The Energy Information Administration reported that U.S. gasoline stockpiles unexpectedly fell last week to  two-year low, and imports slipping caused crude inventories to decline: imports of Saudi Arabia crude fell to their lowest point last week since January 2021, at just 13,000 barrels per day (bpd), down from 150,000 bpd the previous week; this was accompanied by declines of imports from Canada, Iraq, Colombia, and Brazil.

As for OPEC, media reported that it could delay an output increase in December by a month or more due to demand concerns and rising supply; a decision could come as early as next week, according to sources.

Harry Tchilinguirian, head of research at Onyx Capital Group, said the possible delay "is not surprising given the weak macroeconomic realities, particularly in China, which have led to downward revisions in global demand growth estimates."

Mukesh Sahdev, head of oil trading and downstream analysis at Rystad Energy, agreed, remarking that "Our view is that they will continue to cut the barrels and keep the present market short" because producers are "making huge money" from refined products.

Meanwhile, Bloomberg noted that despite modest crude price gains this week, "Commodity and financial markets have two crucial events next week that could whipsaw prices: the U.S. election and a meeting of China's top legislative body, with investors watching for additional stimulus efforts to revive Beijing's economy."

Despite crude prices being driven of late by demand concerns stemming from weak economies, new 'flash' figures released by Eurostat showed that the Eurozone economy grew 0.4 percent between July and September, accelerating from 0.2 percent in the second quarter, compared to expectations of a 0.2 percent decline.

Riccardo Marcelli Fabiani, senior economist at Oxford Economics, said the recovery was "driven by consumption" although investment remained subdued due to "tight monetary policy."