A move lower in Treasury yields and a weaker dollar following some less hawkish comments from some Fed officials yesterday provided a boost to the commodities complex. ICE Brent managed to close up just over 2.1% on the day, placing it well above $81 a barrel. The strength in the oil market comes even though there still appears to be no resolution to the disagreement among OPEC+ members over production targets for 2024. The group is scheduled to meet tomorrow, but if they fail to reach a preliminary agreement, we cannot rule out the risk that the meeting could be further delayed, which would likely put some downward pressure on oil prices. The outlook for the oil market in 2024 will largely depend on OPEC+ policy.
Further support would likely have come from disruptions to oil shipments in the Black Sea following a storm in the region. And this bad weather is expected to continue for most of this week. The disruption to cargoes will affect production, and Kazakhstan’s Energy Ministry has already said that production at its largest oil fields (Tengiz, Kashagan and Karachaganak) has been reduced by 56%.
Overnight API numbers were somewhat neutral, showing that US crude oil inventories fell by 817 Mbbls over the past week, while Cushing stocks decreased by 465 Mbbls. The market expected a small reduction in crude oil inventories. In the case of refined products, gasoline inventories decreased by 898 million barrels, while distillate inventories increased by 2.8 million barrels. If today’s EIA figures show a similar increase in distillate stocks, it would be the first increase since September.