Prices for the Brent and WTI crude oil contracts remain below the psychologically significant levels of $80 and $75 respectively. Despite recent geopolitical tensions, such as escalating Israeli attacks in Gaza and intensified attacks by Iran-backed Yemeni Houthi rebels on merchant ships in the Red Sea, market operators have not priced in comprehensive risk mark-ups as yet.
The Saudi Energy Minister’s recent efforts to convince the market of the effectiveness of the OPEC+ cutbacks agreed for the coming quarter seem to have been unsuccessful so far. Doubts remain about compliance with the cutbacks given the more unsettled internal dynamics within OPEC. Market operators are once again focusing on factors such as increasing production outside OPEC and demand dynamics.
The recent EIA report on US crude oil production showed a new record of 13.24 million barrels per day in September. The official inventory report by the Department of Energy, expected tomorrow, will provide further insight into whether these production levels are continuing. The department’s weekly statistics suggest that US crude oil production has remained stable at a high of 13.2 million barrels per day since the start of October.
Oil futures are currently trading around the previous day’s level. Market operators consider the supply situation to be relatively calm, as indicated by Brent flipping from backwardation to contango on Monday as well as by the contango constellation already observed for WTI in the previous week. In a contango situation, the future price is anticipated to be more expensive than the spot price, suggesting that the market expects supply and demand dynamics to be more balanced in the near term. In contrast, backwardation indicates expectations of a supply disruption or scarcity of the underlying asset in the near term.
The market now eagerly awaits today’s data on the change in US oil inventories.
Stock market data Dec. 5, 2023 08:44
ICE Gasoil DEC: 788.25
ICE Brent FEB: 78.21
NY WTI Crude JAN: 73.23
USD/CHF: 0.8736
Rhein-Fracht to Basel: 44.25