October 17, 2024

The Commodities Feed: Oil holds steady

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NYMEX WTI hovered near $70/bbl while ICE Brent was trading just below $75/bbl this morning as market participants await fresh updates from the Middle East. Meanwhile, market outlooks released by OPEC and IEA this week suggested sluggish demand and a sizable supply surplus for the next year, which is keeping pressure on oil prices.

API numbers released overnight were somewhat constructive for the oil market. The institute reported that US crude oil inventories dropped by 1.6m barrels over the last week, in contrast to the market expectations of a build of 1.5m barrels. The API also reported large inventory draws for products, with gasoline and distillate stocks falling by 5.9m barrels and 2.7m barrels respectively. The more widely followed EIA report will be released later today.

Recent reports suggest Iran encountered an oil leak yesterday near its top export terminal in the Persian Gulf. The leak happened on subsea pipelines close to the Kharg Island export terminal. However, the cause of the incident and its impact on exports are still not clear, while authorities have already started efforts to contain the leak.

US natural gas prices continued the bearish trend yesterday. The front-month Henry Hub contract declined more than 5% to settle at US$2.37/MMBtu yesterday amid unfavourable weather conditions. The latest weather forecasts suggest that temperatures have shifted warmer for most of the US, signalling weakening demand for the power-plant fuel. The EIA will release its weekly US natural gas storage report today and expectations are that natural gas inventories increased by around 77.5Bcf over the last week. Total US storage stands at 3,629Bcf, 5.1% above the five-year average as of 4 October.

Meanwhile, European gas prices also came under pressure on reports of stronger LNG flows. Recent data from Bloomberg suggests that flows from terminals that import liquefied natural gas in northwest Europe rose to the highest level since April earlier this week. An unusually mild autumn across Europe could also weigh on the gas demand for heating purposes over the next few days. Meanwhile, European storage remains higher at 95% full as of 15 October, above the five-year average of 92%.

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