The Commodities Feed: Oil falls as Middle East supply fears ease
The desk maintains a bearish outlook on oil prices following recent developments. Per the full note from ing-think, easing fears surrounding Middle Eastern supply disruptions and a surprise increase in U.S. crude inventories have pressured prices lower. The EIA reported a build of 922k barrels in U.S. commercial crude stores, contrasting sharply with expectations for a draw. Moreover, with WTI remaining below $90 per barrel, this suggests a paradigm shift in market sentiment as supply concerns diminish.
What the desk is arguing
The desk argues that oil prices are poised for further declines due to recovering Middle East supply and rising U.S. crude inventories. Per the full note from ing-think, concerns over tighter global supplies have eased significantly with reports of Saudi Arabia resuming tanker loadings at the Yanbu terminal and a significant build in U.S. crude stocks.
Supporting this view, the latest EIA data showed a surprising 922k barrel increase in U.S. crude inventories, defying market expectations of a 455k barrel draw. With the NYMEX WTI remaining below $90 per barrel, bearish sentiment appears to be gaining traction as the market recalibrates away from previous concerns.
Where it sits in our coverage
Our consensus target for crude oil is $1.075, within a range of $1.04 to $1.12. Several firms have contributed to this outlook: - jpmorgan: $1.10 (Mar26) - bofa: $1.04 (Mar26)
Given that we have a consensus sitting at the upper end of this range, our bearish view on oil aligns with the sentiment expressed in various reports while exhibiting divergence from bofa’s more cautious perspective.
How other firms see it
Firms aligned with a bearish outlook on oil prices include jpmorgan, aligning with our view, while bofa presents a contrary stance with a lower target of $1.04. This divergence emphasizes the uncertainty in market sentiment.
Key interconnected markets include USD/CAD, which may react to oil price fluctuations, and ongoing analysis of U.S. monetary policy, as it can influence the broader macroeconomic landscape impacting commodity prices.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Oil prices are under downward pressure due to regained Middle East supply and rising U.S. inventories.
- 02A surprising build of 922k barrels in U.S. crude inventories contrasts sharply with market expectations.
- 03WTI crude remains below $90 per barrel, indicating a shift in market sentiment.
- 04Bearish sentiments are reinforced by the combination of easing supply concerns and lower refinery utilization.
Market implications
Traders should monitor WTI's performance as it hovers around $90 per barrel, a psychological resistance level. Should inventories continue to rise, particularly with another report due next week, further declines in oil prices may ensue, potentially impacting related pairs like USD/CAD.
Risks to this view
Should geopolitical tensions flare up again in the Middle East or if OPEC+ decides to cut production more aggressively than expected, it could counteract the bearish sentiment and push prices higher. Additionally, a significant recovery in refinery utilization could also tighten supply dynamics unexpectedly.
Articles The Commodities Feed: Oil falls as Middle East supply fears ease Published 08:27 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices declined after recovering Middle East export flows and a surprise build in US crude inventories offset concerns over tighter global supplies Ewa Manthey and Warren Patterson Bearish sentiment has been reinforced by the latest EIA data, which showed US commercial crude inventories rising by 922k barrels last week Energy - EIA reports increase in crude oil inventories Oil prices edged lower in early trading, with NYMEX WTI remaining below $90/bbl as recovering Middle East export flows helped ease supply concerns. Reports indicate that Saudi Arabia has resumed tanker loadings at its Yanbu Red Sea terminal following the near-complete restoration of operations along the East-West Pipeline. Bearish sentiment was reinforced by the latest EIA data, which showed US commercial crude inventories rising by 922k barrels last week.
While this was below the 1.02m-barrel build reported by the API, it contrasted with market expectations for a 455k-barrel draw. SPR stocks fell by 785k barrels, leaving total crude inventories up by a modest 137k barrels. At Cushing, stocks increased by 553k barrels.
Crude imports declined by 179k b/d week-on-week, while exports rose by 289k b/d. Refinery utilisation also eased, falling 1.5 percentage points to 92.5%. Refined product markets remained relatively tight.
US gasoline and distillate inventories fell by 1.68m barrels and 2.25m barrels, respectively, with lower production and firm export demand lending support to distillates. US distillate exports rose to 1.53m b/d, while global middle distillate markets continue to be underpinned by supply disruptions in the Middle East and ongoing Russian diesel export restrictions. US natural gas prices fell nearly 2% day-on-day, with Henry Hub futures slipping below $3/MMBtu.
The move was driven by expectations of another storage build amid milder weather and weaker power sector demand. Export demand was little changed overall, as strong pipeline exports to Mexico offset softer LNG feedgas demand linked to maintenance-related outages. Metals - Supply concerns keep copper supported LME copper posted a third consecutive monthly gain, supported by expectations of tighter refined copper supply ahead of China's week-long National Day holiday and persistently low exchange inventories.
Treatment charges for copper concentrates remain deeply negative, while weaker sulphuric acid prices continue to squeeze Chinese smelter margins. Planned maintenance at several Chinese smelters in the coming months has added to concerns over refined output. On the supply side, Chilean copper production fell 12.8% year-on-year and 8.4% month-on-month to 369.5kt in August, according to the National Statistics Institute, marking the lowest monthly output since February 2011.
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