Crude Supplies Stable Despite U.S. Inventory Surge, OPEC Reassures Market

Petroleum Price

• Oil prices dropped in early Asian trading hours on Tuesday as traders booked profits after prices rallied to their highest in over a month on Monday, amid fears that the Middle East could be on the brink of a region-wide war.
• Brent crude futures fell 23 cents, or 0.3%, to $80.70 per barrel by 0029 GMT. U.S. West Texas Intermediate (WTI) futures dropped 20 cents, or 0.3%, to $76.94 per barrel. MCX crude oil prices opened at ₹6,389, reflecting a decline of 1.33%.

Petroleum Demand and Supply

• The rally began after Iran launched a missile barrage on Israel on Oct. 1. Israel has sworn to retaliate and is weighing its options, with Iran’s oil facilities considered a possible target.
• However, some analysts believe that an attack on Iranian oil infrastructure is unlikely and have warned that oil prices could face significant downward pressure if Israel focuses on other targets.
• Even if an attack targets Iranian oil facilities, there is 7 million barrels per day of spare supply capacity within the Organization of Petroleum Exporting Countries (OPEC) to compensate for the loss of Iran's oil output, ANZ Bank analysts noted on Friday.
• Meanwhile, Hurricane Milton intensified into a Category 5 storm on its way to Florida, forcing at least one oil and gas platform in the U.S. Gulf of Mexico to shut down on Monday.
• U.S. crude oil inventories are expected to rise by 1.9 million barrels in the week ending October 4, according to a preliminary Reuters poll. The American Petroleum Institute is due to release its tally of U.S. stockpiles at 2030 GMT on Tuesday, followed by the official report from the Energy Information Administration at 1430 GMT on Wednesday.

Petroleum News

• Both Brent and WTI crude oil futures witnessed a jump of more than 3% on Monday, in addition to last week’s rally of over 8%.
• Tensions in West Asia continued to escalate as Hezbollah fired missiles into Israeli territory on Monday. Last week, Iran fired several missiles at Israel, marking its direct entry into the conflict in West Asia.
• Market fears have risen over potential disruptions to crude oil supplies from West Asia, as Iran is a major producer of crude oil in the global market.
• Market reports indicated that even if Israel attacks Iran’s oil facilities, OPEC has around 7 million barrels per day of spare production capacity, which could help meet global demand if there is a disruption in Iranian supplies.
• The crude oil market is also closely monitoring the impact of Hurricane Milton on U.S. oil production. The hurricane is expected to pass through the Gulf of Mexico before making landfall on the west coast of Florida later this week.
• Forecasts suggest that the hurricane is likely to miss most of the oil infrastructure in the Gulf of Mexico. However, many ports in the region are imposing restrictions, which could affect oil shipments.

Expert Opinion

• OPEC officials reassured markets, stating that global crude supplies remain unaffected by the ongoing unrest, with enough spare capacity to stabilize the market if necessary. In the U.S., crude oil inventories rose by 3.889 million barrels in the week ending September 27, 2024, compared to expectations of a 1.3 million barrel decline.
• Additionally, stocks at the Cushing delivery hub increased by 0.840 million barrels, and gasoline inventories climbed by 1.119 million barrels. On the other hand, distillate stockpiles, including diesel, dropped by 1.284 million barrels, slightly below the forecasted decrease.