Crude oil is an unrefined petroleum product made from hydrocarbons, and is the world's leading source of energy. The world's top five crude oil exporters include Saudi Arabia, Russia, Iraq, Canada, and the United Arab Emirates. Two-thirds of all oil contracts reference the Brent Blend, which originates from four different fields in the North Sea. West Texas Intermediate (WTI) refers to oil extracted in the US and sent via pipelines to Cushing, OK. WTI is primarily traded in the US.
Crude oil prices are currently recovering. Both WTI and Brent crude oil are currently moving higher. Yesterday, both benchmarks fell sharply following a significant deterioration of risk sentiment across financial markets. While trading volumes in WTI futures decelerated relative to the previous session, note that Brent futures volumes were both higher than the previous session and relative to 30-day averages. This suggests that traders sold Brent with conviction yesterday (but the same cannot be said for WTI). Today's WTI trading range is $67.40 - $75.80.
Looking at recent fundamental developments, Chinese demand for crude oil appears to be stable despite slowing growth in the world's largest crude oil importer. According to Chinese government data, refinery throughput accelerated to 12.49 million barrels per day last month as independent refineries resumed operations. Beyond demand from independent refiners, data from Refinitiv Eikon suggests that large volumes of Iranian crude oil are likely to arrive in China this month and in November. While Chinese GDP growth continues to decelerate, crude oil demand from the country appears to be stable for now.
Beyond data regarding Chinese demand, there are no fundamental developments driving the commodity today. Following a significant sell-off earlier this week, we will downgrade our outlook on crude oil to neutral later today. Over many recent editions of the crude oil daily update, we have remarked that the commodity continues to diverge from both (1) broader trends in global growth and (2) trends seen in the commodity complex. As commodities as an asset class continue to weaken while the US joins the global slowdown, crude oil prices are likely to remain under pressure. We derive our crude oil outlook based on trends in price momentum, trading volumes and changes in underlying volatility. Our outlook on crude oil is now neutral.
|October 12||Baker Hughes Oil Rig Count 12/OCT||869||861|
|October 16||API Crude Oil Stock Change 12/OCT||-2.1M||9.75M|
|October 16||EIA Crude Oil Stocks Change 12/OCT||6.49M||5.987M|
|October 16||EIA Gasoline Stocks Change 12/OCT||-2.016M||0.951M|
|October 19||Baker Hughes Oil Rig Count 19/OCT||869|
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