By Mia Gindis and Julia Fanzeres
Published: Wed, December 13, 2023, 6:21 PM GMT+2
Oil prices saw an upward surge as a robust drawdown in US stockpiles eased concerns about excess supplies, bringing relief to a market previously frozen by bearish sentiments.
Positive Movement Amidst Thin Liquidity
West Texas Intermediate experienced a gain of up to 1.6%, nearing the $70 per barrel mark. This rebound countered earlier declines of 1.3%. The market’s sensitivity to price swings intensified due to thinning liquidity ahead of the holiday season, with US trading volumes consistently below the 30-day average in recent sessions.
Government Data Shows Significant Stockpile Drop
Fresh data released on Wednesday revealed a substantial decrease of 4.3 million barrels in US crude stockpiles last week. The overall decline, including oil and other products, amounted to 10 million barrels — the most significant drop since mid-October.
Year-End Dynamics and Market Noise
Analysts, including Matt Sallee from Tortoise, noted the market’s inclination to trend downward towards the end of the year. Factors such as inventory fluctuations and year-end tax considerations contribute to increased market noise during this period.
Global Supply-Demand Imbalance Persists
Despite OPEC+’s recent decision to deepen output cuts, global supply continues to outpace demand. Market indicators, including contango structures and weak spreads, signal ongoing challenges. Russia’s seaborne crude exports reached their highest weekly average since early July, while the US revised its output estimates for the year upward.
OPEC Forecasts Shortfall Amidst Output Cutbacks
OPEC’s monthly forecast projects a significant shortfall in global oil supplies for the first quarter of 2024, contradicting the group’s recent output cutbacks. The forecasted deficit is estimated at about 1.8 million barrels per day. OPEC and its allies plan to further curtail supply by 900,000 barrels per day from January, widening the anticipated shortfall.
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