Crude prices continued their recovery. The bounce began with an increased likelihood of an extension of the current OPEC+ quotas into 1Q 2021. Further OPEC producers continued to suggest that this was firming up.
The market reacted well to Tuesday’s American Petroleum Institute (API) numbers and the Department of Energy (DOE) confirmation overnight. The surprise “inventory draws” came at an appropriate juncture for the crude market, which continues to struggle under the Covid-19 cudgel.
The French Cabinet unveiled a new draft budget bill for 2020, amending this year’s budget for the fourth time, easing economic concerns at the epicentre for the EU lockdown beatdown and supporting road fuel demand.
It will be submitted to Parliament’s vote in the coming days. This draft aims to shelter the economy from the impact of the second nationwide lockdown in place since October 30th and until December 1st at least. The fiscal package included EUR 20 billion of additional public spending.
On the election front, crude oil like the divided US government, the critical variable in a Democratic sweep would have been the US improved relationship with Iran, which is likely off the table.
So is a possible re-engagement on the nuclear deal, and the prospect of a potential ~1.5mb/d rebound in Iranian production, which would be a massive problem for oil markets? Fortunately for oil markets, it would seem any olive branch to Iran will not be extended anytime soon.
Oil by the numbers: distillate draw received favourably by the market
The API reported a draw of 8.01 million barrels, while analysts had been expecting a build of 890k barrels. It was similar to gasoline, where estimates were for a “draw” of 871k barrels while the API reported at 2.45 million barrels build. Distillates were seen down by 577k barrels and Cushing up by 981k barrels.
The DOE, meanwhile, confirmed a massive draw in oil inventories and reported a build in gasoline stocks instead of a” draw.” The “draw” in distillate stocks, although smaller than expected, was received very positively by the market.
Despite the build in gasoline stocks, the futures rallied, seeing the crack tighten. The recovery in gasoline is going into reverse as total national socks are up 1.5 million barrels to 227.7 million barrels with builds in every PADD except the West Coast. Imports to PADD1 are their highest in four weeks.
Oil market analysis and insights from Stephen Innes, Chief Global Market Strategist at Axi