Thursday , August 11 2022

Oil recovers some losses on Indian imports after falling 6%


The West Texas Intermediate (WTI) futures market rose 78 cents, or 1.4 percent, to $ 54.21 a barrel.


The price of oil returned on Wednesday to a decline of more than 6 percent on the previous day, driven by a unexpected decline in US trade stocks, as well as by crude imports from India. But investors have remained at the limit, warning the International Energy Agency (IEA) of unprecedented oil price uncertainty due to a difficult economic environment and political risk. Brent international oil futures were $ 63.35 / barrel in intraday trade, up 82 cents, or 1.3 percent since their last closing.

The West Texas Intermediate (WTI) futures market rose 78 cents, or 1.4 percent, to $ 54.21 a barrel.

Wednesday's return came after a report by the US oil institute, late Tuesday, that US oil inventory last week dropped unexpectedly by 1.5 million barrels to 439.2 million in the week to November 16.

India's record of roughly 5 million barrels per day (bpd) imports also supported prices, the traders said.

However, Wednesday jumped little to reverse the global market weakness, which saw the crude drum with more than 6 percent prior session amid a sales in global stock markets.

"The global economy is still in a very difficult time and very fragile," IEA chief Fatih Birol said on Tuesday.

US investment bank Goldman Sachs said Wednesday that the renewed price collapse reflected "concern over excess supply in 2019 … (and) a wider sale of cross-goods and cross-assets as concerns about continued growth to grow".

In the context of worsening production and deteriorating demand side, the Organization of Petroleum Exporting Countries (OPEC) is in favor of a supply reduction of between 1 million and 1.4 million bpd to prevent the repetition of the frustration in 2014.

"We anticipate a greater weakness until the OPEC + (December 6) and the G20 summit are clearer (30 November / 1 December)," said Ashley Kelty, an analyst at Cantor Fitzgerald Europe's investment bank.


Despite expectations of OPEC cuts, Brent and WTI prices fell 28 percent and 30 percent respectively from the beginning of October, and the entire structure of the forward price curve changed.

The Brent front curve was steeply downgrading in October, involving a tight market with higher prices than those for further shipment. This makes it unattractive to store oil.

Since then, however, the curve has turned into contango for most of 2019, which implies an excessive supply, as higher prices push it outward, making it attractive for storing oil for later sale.

Goldman said rising output and slow growth in demand led to a "higher supply / reserve capacity next year," but added that it did not expect prices to match the levels reached early in 2016 when crude oil fell under $ 30 a barrel.

James Mick, the energy portfolio manager with US investment firm Tortoise, said that "some of the supply problem has grown in the US."

US crude oil production rose nearly a quarter this year, reaching a record high of 11.7 million barrels, largely due to increased shale production.

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