Oil Mixed As Concerns Over Energy Crunch Decline

But OPEC maintains global stockpiles will remain below average for Q4/21: File Image/Pixabay

With the analytical community worrying about global crude supply shortages one minute and demand erosion due to possible future Covid outbreaks the next, Thursday saw mixed trading in two key commodities – spurred by the Organization of the Petroleum Exporting Countries (OPEC) saying it expects a tighter global market at the end of this year.

After it was learned that OPEC's Joint Technical Committee had calculated that stockpiles in developed economies will stand 158 million barrels below average, a bigger deficit than the 106 million projected a month ago, West Texas Intermediate rose 15 cents to settle at $82.81 per barrel.

Brent fell 26 cents to settle at $84.32 per barrel.

Overall, hand-wringing over what analysts were convinced was an inevitable energy crunch this winter seems to have abated slightly with Russia's president Vladimir Putin saying his country will send extra gas to the continent next month, and warming relations between Iran and the European Union heralding greater chances of Iranian barrels coming back to the market.

Additionally, Amos Hochstein, the U.S. senior advisor for global energy security, on Thursday pushed for higher production by stating, "Producers should ensure that global oil markets and gas markets are balanced"; this came on the heels of supplies at the Cushing, Oklahoma storage hub dropping another 1.8 million barrels last week, according to Wood Mackenzie.

Unsurprisingly, refiners are being declared the big winners as stockpiles around the world deplete: Steve Sawyer, analyst at Facts Global Energy, said  about 2.3 million barrels per day (bpd) of refining capacity internationally was shut during the pandemic and another 1 million barrels are likely to be shut in the next year – and this mean refiners are enjoying hefty margins.

In the U.S., the Nymex gasoline crack (a gauge of the margin refiners can obtain from a barrel of crude based on futures prices), was trading above $16 per barrel on Thursday, the highest since 2017.

But not everyone is enjoying the bounties of the demand surge: Canada's heavy crude price reportedly collapsed at Cushing with a discount of $7 per barrel less than the price at the Canadian hub, due to refiners shunning heavy and high sulfur crude for lighter grades that are cheaper to process.