Oil holds near three-month low

Oil held near a three-month low as a forecast drop in US gasoline consumption added to a growing array of indicators suggesting the demand outlook is worsening.

Global benchmark Brent traded below US$82 a barrel after plunging 4,2 percent on Tuesday, while West Texas Intermediate was near US$77. American gasoline demand will drop to a 20-year low next year on a per-capita basis, according to a US government report, with prices at the pump and inflation likely causing a reduction in discretionary driving.

Oil has fallen sharply over the last three weeks as the Israel-Hamas war-risk premium evaporated and the demand outlook deteriorated. There are worries over the state of the economy in China, the world’s biggest importer, and fresh doubts on whether the Federal Reserve has finished tightening. On the supply front, Russian shipments are running near a four-month high, while industry data showed US crude stockpiles increased by almost 12 million barrels last week.

The growing bearishness is also being reflected in the futures curve. WTI’s prompt timespread is now just 10 cents a barrel in backwardation, a bullish structure where near-term cargoes are more expensive than later-dated ones. That’s down from more than US$1 in backwardation on October 23.

“The market is clearly not as tight as many were anticipating,” said Warren Patterson, head of commodities strategy at ING Groep NV. “That has coincided with easing concerns over potential Middle Eastern supply disruptions and sentiment turning more negative.”

The Israel-Hamas war has entered its second month with Israeli troops moving into the heart of Gaza City. Prime Minister Benjamin Netanyahu told ABC News that his country could keep security control over Gaza for an “indefinite period.” – Bloomberg

The conflict has yet to have an impact on oil supply from the Middle East, the source of about a third of the world’s crude.

Crude inventories at the key hub in Cushing, Oklahoma, increased by 1,1 million barrels last week, the industry-funded American Petroleum Institute reported Tuesday, according to a person familiar. That would be the biggest increase since June if confirmed. The Energy Information Administration won’t publish official data on Wednesday, releasing two weeks’ worth on November 15.

However, OPEC+ said it was still positive on the demand outlook as it prepares for its next ministerial meeting. Saudi Arabia and Russia may decide whether to extend voluntary supply cuts into 2024 at the gathering in the final weekend of November. Bloomberg