U.S. Oil Stockpiles Surge Amid Weak Demand, UAE Expands Strategic Storage in India

Petroleum Price

• Oil prices rose by more than 1% on Thursday, spurred by concerns of Hurricane Francine impacting output in the U.S., the world's biggest crude producer, though worries of lower demand capped gains.
• Brent crude futures for November were up $1, or 1.4% at $71.61 a barrel at 0632 GMT. U.S. crude futures for October were up 92 cents, or 1.4%, at $68.23 a barrel.
• Both contracts rose by more than 2% in the previous session as offshore platforms in the U.S. Gulf of Mexico were shut and refinery operations on the coast were disrupted by Hurricane Francine's landfall in southern Louisiana on Wednesday.

Petroleum Demand and Supply

• U.S. oil stockpiles rose across the board last week as crude imports grew and exports dipped, the Energy Information Administration said on Wednesday.
• The data also showed gasoline demand fell to its lowest since May at the same time distillate fuel demand dropped, with refinery runs also declining. The U.S. is the world's biggest oil consumer.
• Despite worries about Hurricane Francine impacting supply, the medium-term trend remains bearish for WTI crude, supported by weak demand from China and "growth scare concerns" in the U.S., said Kelvin Wong, senior market analyst at OANDA.
• Earlier in the week, the Organization of the Petroleum Exporting Countries cut its forecast for global oil demand growth in 2024 and also trimmed its expectation for next year, its second consecutive downward revision.

Petroleum News

• The United Arab Emirates (UAE) looks forward to increasing its crude oil storage volumes in India at Indian Strategic Petroleum Reserves Ltd (ISPRL) facilities.
• ADNOC, which currently holds around 5.86 million barrels at Mangalore, is discussing new storage options in partnership with India.
• The agreement signed during the visit to India by Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, establishes a basis for extending this cooperation.
• Discussions also include the renewal of the existing management agreement, with conditions to be negotiated between the parties.
• The recent authorization granted to ADNOCto re-export oil from Indian storage caverns positions India on a par with other Asian countries such as Japan and South Korea, where international oil producers have similar rights. However, to date, ADNOC has not made use of this option.
• India’ s strategy of tripling its strategic storage capacity over the next ten years underlines its objective of strengthening its energy security, in response to geopolitical uncertainties and price fluctuations.

Expert Opinion

• India’s plan to strengthen its strategic reserves includes a significant expansion of its storage facilities. The first phase comprises three sites with a total capacity of 5.33 million tonnes: Visakhapatnam, Mangalore, and Padur.
• The second phase, currently in preparation, will add 6.5 million tonnes at Chandikhol and Padur under a public-private partnership model. Oil traders are now looking ahead to International Energy Agency's monthly market report later this week for any signs of a weakening demand outlook.