Oil Sinks 2% As Pundits Question Crude Glut Narrative

A massive drop in U.S. inventories and a 2026 global rebalance was contemplated: File Image/Pixabay 

Tuesday saw a third straight day of oil price declines, and although a host of issues sparking conflicting sentiment in the previous session caused prices to remain range bound, this time they caused a 2 percent drop in the commodity.

Brent settled down $1.22, or 1.9 percent, to $64.40 per barrel, and West Texas Intermediate settled down $1.16, also 1.9 percent, at $60.15.

Some of the factors weighed by traders included:

Refiners in India telling media they have not placed new orders for oil purchases from Russia since the latest sanctions against the former Soviet Union were imposed, as they await clarity from the government and suppliers.

Also, four sources familiar with the matter told media that the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia are leaning toward another output hike, at a time when the market is perceived to be oversaturated.

Additionally, Dennis Kissler, analyst at BOK Financial, questioned how impactful a trade deal between the U.S. and China would be to oil: “While the futures market has added in additional trade with China and less crude exports from Russia, traders remain cautious as to how much this will actually affect global supplies.”

Even the long-standing concern that the global oil market was heading for oversupply was addressed on Tuesday: analysts at Morgan Stanley stated that fundamentals are expected to rebalance from a surplus in the second half of next year; they further noted that underlying demand may be stronger than most pundits believed, but tempered their optimism by remarking, “Still, the industry likely needs to store a sizeable quantity of oil in 2026, particularly in the first half.”

To cap everything on Tuesday, the American Petroleum Institute released figures that further questioned the glut narrative: U.S. crude inventories experienced a massive drop of 4 million barrels in the week ending October 24, compared to expectations of a 2.9 million barrel dip.

Oilprice.com estimated that U.S. crude inventories are so far showing a net loss of 6.4 million barrels for the year.