Crude Prices Dip on Eased Geopolitical Risks Amid Slowing Demand, Rising US Inventory Levels

Key Takeaways

• Brent and WTI crude futures rose slightly in early trading, reflecting moderate price support amid geopolitical developments.
• API reported a small decline in U.S. crude inventories, diverging from expectations of a significant build-up.
• EIA's forecast predicts slower global oil demand growth due to economic slowdown in China and North America.
• Market sentiment remains bearish with easing geopolitical tensions and increased U.S. inventories contributing to downward pressure on prices.

Petroleum Price Trends and Futures Update

• January Brent oil futures were at $71.11, up by 0.54 per cent, and December crude oil futures on WTI (West Texas Intermediate) were at $67.61, up by 0.60 per cent.
• November crude oil futures were trading at ₹5,701 on Multi Commodity Exchange (MCX) during the initial hour of trading on Wednesday against the previous close of ₹5,668, up by 0.58 per cent.
• December futures were trading at ₹5,684 against the previous close of ₹5,653, up by 0.55 per cent.

Demand and Supply Dynamics in the Petroleum Market

• According to the industry body American Petroleum Institute (API), crude oil inventories in the US declined by 0.57 million barrels for the week ending October 25. Market was expecting an inventory build of 2.3 million barrels during the period.
• Official data on crude oil inventory level in the US is expected later on Wednesday. The US EIA’s (Energy Information Administration) official data is expected to provide a clear picture on the crude oil inventory levels in the US.
• Crude oil prices fell in Tuesday’s session following the reports of a potential meeting between the Israeli Prime Minister, his ministers, military heads, and intelligence officials to explore a diplomatic solution to the war in Lebanon.
• November natural gas futures were trading at ₹243.20 on MCX during the initial hour of trading on Wednesday against the previous close of ₹241.50, up by 0.70 per cent.

Petroleum News: API and EIA Inventory Reports

• Crude oil prices declined by 0.74% to 5,668 as supply disruption concerns eased after Israel targeted only military and industrial locations over the weekend, avoiding Iranian oil facilities. Additionally, Israeli Prime Minister Netanyahu’s openness to a brief truce in Gaza further lowered geopolitical risk premiums.
• The focus has since shifted back to weak fundamentals, especially subdued demand growth from China and anticipated OPEC output increases. On the supply side, the U.S. Department of Energy is purchasing up to 3 million barrels for the Strategic Petroleum Reserve (SPR), adding to the 55 million barrels bought this year at an average price of $76 per barrel, significantly below the $95 per barrel selling price in 2022.
• Meanwhile, U.S. crude inventories saw an increase of 5.474 million barrels for the week ending October 18, surpassing market expectations, while distillate stocks dropped by 1.14 million barrels, against a predicted 2-million-barrel decline. Notably, stocks at the Cushing, Oklahoma hub fell by 0.346 million barrels.
• The EIA’s latest report forecasts that global oil demand growth will slow to 1.2 million bpd in 2025, reaching 104.3 million bpd, 300,000 bpd below prior estimates due to weakening economic activities in China and North America.
• U.S. demand is projected to reach 20.5 million bpd next year, while U.S. production is expected to hit 13.22 million bpd this year, slightly below earlier forecasts.

Expert Opinion on Petroleum Market

• The market outlook suggests a bearish trend for crude oil prices in the near term due to easing geopolitical tensions and weak demand growth, especially from China. Additionally, U.S. crude inventories have risen, and OPEC output is anticipated to increase, adding downward pressure.
• The EIA forecasts global oil demand growth will slow to 1.2 million barrels per day (bpd) in 2025, with U.S. demand and production projections also slightly lower than previous estimates.