Oil Prices Rise To $91 On Increased Demand In U.S, China

OPEC+ Maintains Monthly Crude Oil Output Increase At 400,000bpd

Despite continuous conflict in the Middle East, oil prices rose on Thursday due to expectations for strong demand in the US and China. Oil prices are still being supported by the Middle East’s rising tension; Brent ended the day 1.78% higher at US$91.50 a barrel following an explosion at a hospital in Gaza.

Israel and the US Pentagon have both subsequently claimed that a terrorist organization was behind the explosion, which was first attributed to an Israeli attack.

The act simply serves to exacerbate the already unstable situation in the area, and Iran has already urged Islamic oil exporters to implement an oil embargo on Israel in light of the ongoing hostilities. Israel imports a bit more than 200Mbbls/d of oil, with the two biggest suppliers being Kazakhstan and Azerbaijan at the moment.

“If we were to see a disruption to these flows, given the relatively small volumes, Israel should be able to quite easily find alternatives”, ING commodities analysts said in a note.

Since the Russia-Ukraine war, the oil market has shown fairly effectively how trade flows may adapt to trade constraints, according to analysts. In related news, the Energy Information Administration (EIA) reported on Thursday that US commercial crude oil stocks dropped by 1.1% during the week ending October 13.

Contrary to the American Petroleum Institute’s prediction of a drop of about 4.4 million barrels, inventories decreased by about 4.5 million barrels to 419.7 million barrels. The information showed that last week’s strategic petroleum reserves, which are not included in commercial crude supplies, were steady at 351.3 million barrels.

Over the same time period, gasoline stocks decreased by around 2.4 million barrels to 223.3 million barrels. According to EIA statistics, US crude oil output fell by 1,000 barrels per day (bpd) to around 13.6 million bpd during the week ending Oct. 13.
US crude oil imports also fell by 387,000 bpd to about 5.94 million bpd over the same period, while crude oil exports surged by 2.23 million bpd to approximately 5.3 million bpd.

In the Short-Term Energy Outlook (STEO) released on Oct. 11, the EIA predicted that crude oil output in the country would reach an average of 12.92 million bpd this year. Next year, crude oil output in the country is expected to reach 13.12 million bpd.

Chinese macro data released yesterday came in stronger than expected, whilst the oil numbers were also supportive with refineries in China processing a record 15.5MMbbls/d of crude oil over the September.

In addition, domestic demand remains robust coming in at around 15.2MMbbls/d, up 3% month on month and 5% higher year on year. Given these stronger numbers, domestic crude oil inventories fell at a rate of around 200Mbbls/d last month.

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