Thursday, December 8, 2022

Crude Oil Drifts Higher on Hopes for OPEC+ Discipline By


© Reuters.

By Geoffrey Smith — Crude oil prices rose modestly on Friday, as the market again looked through short-term developments on the Covid-19 front to focus on the prospect of a recovery in demand next year.

Fears that the latest wave of the pandemic will lead to broader lockdowns and fresh demand destruction played second fiddle to hopes that the availability of vaccines next year will allow economic life to return to normal.

By 11:40 AM ET (1640 GMT), futures were up less than 0.1% at $41.94 a barrel, while the international marker was up 0.5% at $44.42 a barrel.

U.S. RBOB gasoline futures were up 1.0% at $1.1745 a gallon, close to their high point for the week.

Brent was outperforming West Texas Intermediate partly on the back of a report by Bloomberg pointing out that levels of crude storage at the national hub of Cushing Oklahoma had once again risen above 80%, the level where they typically exert downward pressure on prices.

Cushing crude stocks have risen in 15 out of the last 20 weeks, and such weekly declines as there have been appear small next to the builds in other weeks. Last week’s build of 1.2 million barrels, while smaller than expected, was the biggest in five weeks.

Stockpiles tend to rise as fuel demand weakens, a factor that’s likely to be in evidence next week. The Center for Disease Control advised Americans not to travel for the Thanksgiving holiday, to avoid spreading the virus faster. If that warning is heeded, it will hit what is usually a peak week for U.S. fuel demand. Also weighing will be the new seven-hour curfew in California, the state that consumes more oil than any other in the U.S.

On the plus side, traders appear increasingly confident that the OPEC+ bloc will postpone its scheduled output increase when it meets in 10 days’ time – even though a monitoring committee meeting this week gave no formal recommendation on output policy.

The bloc will have to accommodate volumes of oil from OPEC member Libya that are still rising in the wake of an October ceasefire in its civil war.

“Libya, which is exempt from (production) cuts (under the OPEC+ deal), is coming back with a vengeance,” kpler analyst Homayoun Falakshahi said via Twitter. “The current production ramp-up suggests exports could pass the 1 (million barrels a day) threshold by December and reach the 2019-average of 1.1 mbd fairly rapidly.”

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