China woe hits ANS
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Crude slides on supply expansion; demand destruction; strong dollar
Steve Sutherlin Petroleum News
Alaska North Slope crude posted a slight gain Nov. 13, adding 18 cents to close at $71.20 per barrel. West Texas Intermediate rose 31 cents on the day to close at $68.43 and Brent gained 39 cents to close at $72.28.
The gains were but a blip, however, on a downward trend over five trading days ending Nov. 13 that saw ANS shed $3.15 from its Nov. 6 close. Traders worried over continued weak demand in China -- the world's largest oil buyer -- and the specter of rising global production.
China Customs data revealed October imports of 10.53 million barrels per day, down from 11.07 million bpd in September and 11.53 million bpd in October 2023, Reuters reported Nov. 11. Year-to-date, China's imports were 10.94 million bpd, off 3.7% on a per day basis from 11.36 million bpd for the period in 2023.
Recent price weakness "was actually linked to perceived hit to oil demand in any trade war between the US and China," Mizuho's Robert Yawger was quoted in Barron's Nov. 13.
Yawger said Chinese buyers have been "the global demand construction powerhouse for years but are retracing in 2024."
A rising dollar weighed on demand as well, making oil more expensive for buyers that must convert local currency to obtain the dollar-denominated commodity.
ANS plunged $1.21 Nov. 12 to close at $71.02, but WTI added 8 cents to close at $68.12 and Brent added 6 cents to close at $71.89.
On Nov. 11, ANS slid 98 cents to close at $72.24, while WTI plummeted $2.34 to close at $68.04 and Brent plummeted $2.04 to close at $71.83.
Nov. 8 was also a down day: ANS plunged $1.66 to close at $73.21, WTI plunged $1.98 to close at $70.38 and Brent plunged $1.76 to close at $73.87.
ANS and WTI each rose 53 cents Nov. 7 to close at $74.88 and $72.36 respectively, as Brent rose 45 cents to close at $75.63.
OPEC cuts oil demand forecast The Organization of the Petroleum Exporting countries has cut its global oil demand growth forecast for 2024 in its November Monthly Oil Market Report released Nov. 12.
The cartel sliced 107,000 bpd from its October assessment and is now calling for demand to rise by 1.8 million bpd, year over year, mainly due to updated data for 1Q24, 2Q24 and 3Q24.
For 2025, OPEC revised its global oil demand growth estimate by 103,000 bpd from its October assessment, arriving at a growth estimate of 1.5 million bpd, year over year.
Liquids supply in 2024 from countries not participating in the OPEC+ Document of Cooperation is expected to grow by 1.2 million bpd, year over year -- unchanged from October's assessment, OPEC said, adding that the main growth drivers are expected to be the United States and Canada.
Crude oil production by countries participating in the OPEC+ DoC increased by 0.21 million bpd in October compared with September, to average some 40.34 million bpd, "as reported by available secondary sources," OPEC said.
Trump oil production boost questioned President-elect Donald Trump has said he will remove obstacles to oil and gas drilling in the United States to boost supplies and lower gasoline prices, but Darren Woods, ExxonMobil CEO is urging caution in expectations for actual production growth.
The global market is already well-supplied, Woods told Semafor at the opening of COP29 in Baku, Azerbaijan Nov. 12.
"I don't think today that production in the U.S. is constrained," Woods said. "So, I don't know that there's an opportunity to unleash a lot of production in the near term, because most operators in the US are optimizing their production today."
David Blackmon, Forbes contributor and public policy analyst/consultant agrees.
"Companies' business plans are set to respond to and exploit both public policies and market realities, and that is not going to change," Blackmon said in a Nov. 12 Forbes piece. "Thus, while federal energy policy actions in a 2nd Trump term will certainly be more pro-oil and gas business than they've been during the Biden/Harris years, company management teams will remain bound by market realities that strongly advocate against mounting a new U.S.-focused drilling boom."
Biden/Harris Department of Interior officials, including Interior Secretary Deb Haaland, have employed means to keep the federal leasing process largely inactive despite adverse court orders and statutory requirements for holding regular lease sales, he said, adding, "This will be an area of low-hanging fruit in which Trump will be able to show quick progress."
Public policy can be a powerful force in the oil and gas sector, but market forces remain more powerful still, Blackmon said.
"'Drill, Baby, Drill' is a political slogan, not a business plan," he said.
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