Oil Prices Rise On Stockpile Report Showing Big Draw And Disturbing Build

Meanwhile, Saudis reveal Biden plea to delay output cut: File Image/Pixabay

Crude traders on Thursday managed to ignore their inflation fears and focused instead on the realities of market tightness, with the result being the first rise in oil prices this week.

West Texas Intermediate rose $1.84 to settle at $89.11 per barrel and Brent climbed $2.12 to $94.57 per barrel after draws from U.S. distillate stockpiles were reported by the Energy Information Administration, despite forecasts for a 2 million barrel drop.

Traders were also influenced by the International Energy Agency warning that production cuts mandated earlier this month by the Organization of Petroleum Exporting Countries (OPEC) would exacerbate global tightness and cause prices to spike.

Matt Sallee, portfolio manager at Tortoise, said, "The combination of a big distillate draw, another big SPR draw and then a reversal in the exports - I think if you back those things out, this was probably a more bullish report."

For the record, U.S. distillate stockpiles, which include diesel and heating oil, fell by 4.9 million barrels in the week ended Oct. 7; this contrasted with a surprise 2 million barrel build of gasoline stocks and a larger-than-expected near 10 million barrel rise in crude inventories.

But while the report sent bullish signals to some traders, it was cause for concern for Phil Flynn, senior market analyst at Price Futures Group Inc.

He said, "The most disturbing part of the report is that distilling inventories are so far below average [and] winter is coming: the market is looking at the big picture, as opposed to the short-term demand numbers that were impacted by the storm."

Thursday's trading activity didn't diminish the notion that rising inflation will ruin fuel demand, and Jamie Dimon, CEO of JPMorgan Chase & Co., warned that persistent and elevated inflation could spur interest rates to rise higher than 4.5 percent.

Also, in warning of the outcome of OPEC's output cuts, the IEA said the initiative could lead to a global recession; the agency stated that the plan "has derailed the growth trajectory of oil supply through the remainder of this year and next, with the resulting higher price levels exacerbating market volatility and heightening energy security concerns."

In other oil news on Thursday, Saudi Arabia revealed that U.S. president Joe Biden asked the de-facto leader of OPEC to delay its decision on the production cuts for a month, which would have delayed the decision until after the U.S. midterm elections.

The Saudis of course declined, thus ensuring tighter supplies and higher prices, recession worries - and possibly longevity troubles for a deeply unpopular presidency.