Crude oil and gasoline prices retreated Thursday, primarily due to a strengthening dollar, cooling Middle East tensions following a ceasefire, and Saudi Aramco's decision to maintain unchanged November pricing for Asian customers, signaling weak demand. This decline occurred despite several supportive factors, including OPEC+'s smaller-than-anticipated production increase, reduced Russian refinery output following drone attacks, and lower-than-average US crude and product inventories. The potential resumption of Iraqi oil exports, adding 500,000 bpd, also presents a future bearish supply increase.
Crude oil and gasoline prices experienced a notable decline on Thursday, primarily influenced by a strengthening dollar, which reached a 1.75-month high, and easing geopolitical tensions in the Middle East following an Israel-Hamas ceasefire. Further bearish pressure stemmed from Saudi Aramco's decision to maintain unchanged November delivery prices for Asian customers, contrary to expectations for a 30-cent increase, signaling underlying weakness in energy demand. A broader risk-off sentiment in asset markets also contributed to the downward price movement. Despite these immediate headwinds, several factors provided underlying support for oil prices. OPEC+ agreed to a modest 137,000 bpd production increase for November, significantly less than the anticipated 500,000 bpd boost, indicating continued supply restraint. Additionally, Ukrainian drone attacks severely impacted Russian refining capacity, with the Kirishi refinery halting most production and total refined-product flows falling to a 3.25-year low of 1.94 million bpd in early September. US crude, gasoline, and distillate inventories also remained below their respective 5-year seasonal averages, suggesting tighter domestic supply. Looking ahead, the potential resumption of Iraqi oil exports from Kurdistan, which could add 500,000 bpd to global markets, presents a future bearish supply increase. Conversely, the threat of additional sanctions on Russian energy exports, with the US proposing up to 100% tariffs on Russian oil purchases by China and India, remains a significant geopolitical risk factor for global supply. US crude oil production, while near a record high at 13.629 million bpd, saw a decline in active oil rigs, falling by 2 to 422, which could temper future growth. The market currently exhibits a complex interplay of demand concerns, geopolitical risks, and supply adjustments. While immediate price action was bearish due to macro factors and demand signals, underlying supply constraints from OPEC+ and Russia, coupled with low US inventories, suggest a floor for significant downside, creating a mixed outlook.
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