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James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are under pressure Wednesday as sellers returned after yesterday’s one-day reprieve. The markets gave up yesterday’s gains early in the session as a surge in U.S. crude stocks and rising coronavirus infections in the United States and Europe fanned fears of a supply glut and weaker fuel demand.

At 09:49 GMT, December WTI crude oil is trading $38.00, down $1.57 or -3.97% and December Brent crude oil is at $39.90, down $1.30 or -3.16%.

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American Petroleum Institute Weekly Inventories Report

The API reported on Tuesday a bigger build than expected in crude oil inventories of 4.577 million barrels for the week-ending October 23. Analysts had predicted a much smaller inventory build of 1.11 million barrels.

The API also reported a surprise build in gasoline inventories of 2.252-million barrels of gasoline for the week-ending October 23 – compared to the previous week’s 1.622-million barrel draw. Analysts had estimated a 2.0-million-barrel draw for the week.

Distillate inventories were down by 5.333 million barrels for the week, compared to last week’s 5.983-million-barrel draw, while Cushing inventories rose by 136,000 barrels.

Oil production in the United States slid significantly last week, increasing the gap between this week and the all-time high this year to 3.2 million barrels per day. U.S. oil production currently sits at 9.9 million bpd, according to the Energy Information Administration (EIA).

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Daily Forecast

WTI and Brent crude oil prices finished higher on Tuesday despite the expected drop in demand because of a number of factors. Bearish factors this week include a ramp-up of oil production in OPEC producer Libya and a surge in COVID-19 cases in the United States, Europe and Russia.

Another hurricane in the Gulf of Mexico helped produce a rise in prices yesterday, but the reaction appeared to be muted as forecasts began to show the storm would miss major production facilities.

“A resurgence in COVID-19 cases in Europe and North America has stopped the recovery in demand in its tracks,” ANZ Research said in a note.

“If market conditions worsen, (OPEC+) will have no choice but to delay the increase of quotas by a month or two at its meeting on December 1,” ANZ said.

Russian President Vladimir Putin indicated last week he may agree to extend OPEC+ oil production reductions.

It appears that prices are likely to continue to retreat until OPEC+ decides it can’t take the pain. I don’t think anyone can control the demand recovery at this time, but production can be controlled and that may be enough to provide short-term support.

Today’s Energy Information Administration (EIA) weekly inventories report is expected to show a 1.5 million barrel build in crude. However, its the gasoline and distillate numbers that are likely to draw the most attention from traders.

For a look at all of today’s economic events, check out our economic calendar.

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