Crude Oil Prices Rally on Energy Demand Optimism

On Wednesday, November WTI crude oil (CLX25) recorded a rise of +0.82 (+1.33%), while November RBOB gasoline (RBX25) increased by +0.0156 (+0.82%).

Both crude oil and gasoline prices saw an uptick on Wednesday. The S&P 500’s rally to a fresh record high illustrated strong confidence in the economic landscape, bolstering energy demand and crude values. Additionally, there was ongoing support for crude prices stemming from OPEC+’s announcement on Sunday regarding a less-than-anticipated production increase. However, the gains in crude were partially offset by a surge in the dollar index (DXY00) reaching a 1.75-month peak.

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In the weekly EIA inventory report released Wednesday, the results were mixed for crude and products, with crude stocks rising more than anticipated, while gasoline and distillate inventories saw a steeper decline than expected.

Crude oil prices received a boost from OPEC+’s decision on Sunday to increase its crude production target by 137,000 bpd starting in November, a figure lower than analysts had predicted, which was a 500,000 bpd hike. Currently, OPEC+ is working towards a production increase of 1.66 million bpd to fully reverse the 2.2 million bpd cut made earlier in 2024. Notably, OPEC’s output in September climbed by +400,000 bpd, reaching 29.05 million bpd, the highest level recorded in 2.5 years.

However, a negative aspect for crude prices was Saudi Arabia’s state-owned Aramco maintaining its price for its main oil grade for Asian clients for November unchanged, defying expectations of a 30-cent hike per barrel. The absence of an increase indicated potential weaknesses in energy demand, adding bearish pressure to crude prices.

Additionally, a reduction in crude output from Russia is lending support to global oil prices after reports emerged that the Kirishi oil refinery, with a capacity of 160,000 bpd, has suspended most of its operations following a Ukrainian drone strike and subsequent fire on Saturday. In recent months, Ukraine has targeted about 15 Russian refineries, further straining Russia’s fuel supply and affecting its crude export capabilities. The attacks have led to a decrease in Russia’s refined product flows to 1.94 million bpd in the initial 15 days of September, marking the lowest monthly average in over 3.25 years.