OPEC+ Cuts Extended Amid US Inventory Build and Election Uncertainty

Key Takeaways

• Crude futures dipped following increased US inventories.
• Hurricane Rafael may disrupt Gulf oil output.
• OPEC+ prolongs cuts to address price weakness.
• US sets oil production record; global demand forecast drops.
• Indian fuel prices unchanged despite global crude price decline.

Petroleum Price

• Crude oil futures traded lower on Wednesday morning after industry data showed an increase in inventories in the US for the week ending October 25. Additionally, the market is awaiting the results of the US presidential election.
• January Brent oil futures were at $74.77, down by 1.01 per cent, and December crude oil futures on WTI (West Texas Intermediate) were at $71.35, down by 0.89 per cent. November crude oil futures were trading at ₹6,014 on the Multi Commodity Exchange (MCX) during the initial hour of trading on Wednesday, against the previous close of ₹6,054, down by 0.66 per cent, and December futures were trading at ₹5,998, against the previous close of ₹6,036, down by 0.63 per cent.

Petroleum Demand and Supply

• According to the industry body American Petroleum Institute (API), crude oil inventories increased by 3.13 million barrels for the week ending October 25 against a decline of around 0.57 million barrels in the previous week. Official data on crude oil inventory levels in the US is expected to be released by the US EIA (Energy Information Administration) later on Wednesday.
• Meanwhile, Hurricane Rafael in the US threatened oil production in the Gulf of Mexico. This hurricane is likely to impact the production output in the US. Market is waiting the results of the presidential election in the US where Donald Trump and Kamala Harris are in the race. ICE Brent settled above $75 a barrel on Tuesday with a weaker dollar likely supporting the market. “Oil will likely be vulnerable to broader moves in markets as we get more clarity on how the US election plays out.
• For oil fundamentals, a Trump victory could provide some short-term upside, with the risk of stricter sanction enforcement against Iran. However, in the medium to longer term, a Trump victory could be more bearish for oil due to trade and foreign policy. Meanwhile, a Harris victory would likely keep the status quo,” they said.

Petroleum News

• Crude oil prices rose by 0.5% to settle at 6,054 as OPEC+ announced an extension of its current output cut of 2.2 million barrels per day (bpd) through December, postponing a planned production increase of 180,000 bpd. The decision was made in response to declining prices and weak demand. Additionally, geopolitical concerns, particularly around potential tensions between Iran and Israel, have fueled further market anxiety. The U.S. presidential election, with a tight race between Kamala Harris and Donald Trump, and expectations of a 25 bps rate cut by the Federal Reserve on Thursday have also added to market volatility. In China, the National People’s Congress is meeting to consider new stimulus measures aimed at supporting a slowing economy, particularly focusing on local government debt.
  Meanwhile, U.S. oil production hit a record high of 13.4 million bpd in August, led by increases in key states such as Texas and New Mexico, according to the U.S. Energy Information Administration (EIA). However, crude inventories in the U.S. dropped by 0.515 million barrels in the week ended October 25, reversing part of the previous week’s substantial build-up. Gasoline stocks also fell sharply, while crude stocks at the Cushing hub rose by 0.681 million barrels. The EIA has adjusted its global and U.S. oil demand forecasts downward, citing economic weakness in China and North America, with demand expected to reach 104.3 million bpd globally next year, about 300,000 bpd below prior estimates.

Expert Opinion

It is anticipated that the crude oil market is under fresh buying pressure, with open interest rising by 0.39% to 13,254 contracts. Crude oil finds support at 6,003, and a break below could lead to 5,953. On the upside, resistance is at 6,111, with the potential for prices to reach 6,169 if this level is surpassed. In India, petrol and diesel prices are updated daily by the government-owned oil companies Indian Oil, Bharat Petroleum, and Hindustan Petroleum. While crude oil’s cost influences these prices, changes are often gradual, especially since India’s fuel taxes are applied at the state level. Today, despite the international drop in crude oil prices, there has been no adjustment to the fuel prices at the national level.