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ANS price firms up
Surprise inventory draw offset by strong dollar; OPEC+ decision looms
Steve Sutherlin Petroleum News
Alaska North Slope crude dropped $1.28 Dec. 4 to close at $71.47, while West Texas Intermediate plunged $1.40 to close at $68.54 and Brent dropped $1.31 to close at $72.31.
(See graphic in the online issue PDF)
Despite an amplification of volatility over the three trading days following the Thanksgiving holiday weekend, ANS closed just 15 cents below its close of $71.62 on the previous Wednesday, Nov. 27.
U.S. commercial crude oil inventories for the week ended Nov. 29 -- excluding Strategic Petroleum Reserve levels -- dropped 5.1 million barrels from the previous week to 423.4 million barrels -- 5% below the five-year average for the time of year, the U.S. Energy Information Administration said Dec. 4.
The drawdown dwarfed analyst expectations from a Reuters poll of a 700,000-barrel decline, while also exceeding a 1.6 million barrel draw called for in survey of analysts conducted by S&P Global Commodity Insights.
Total motor gasoline inventories increased by 2.4 million barrels for the period, reaching 214.6 million barrels -- 4% below the five-year average for the season, the EIA said. Distillate fuel inventories rose by 3.4 million barrels on the week to 118.1 million barrels -- 5% below the five-year average for this time of year.
The S&P Global Commodity Insights survey forecast inventory gains of 1.6 million barrels for gasoline, and 800,000 barrels for distillates.
Such negative price action Dec. 4 in the face of many bullish factors may be in large part a correction from the previous day's price action, out of a market rife with speculation and rumor as it awaits more concrete developments to drive its direction.
On Dec. 3, prices moved sharply skyward as ANS leapt $1.77 to close at $72.75, WTI leapt $1.84 to close at $69.94 and Brent leapt $1.79 to close at $73.62.
Crude prices made their 2% spike Dec. 3 after Israel said it would attack the Lebanese state if its truce with Hezbollah should collapse, Reuters reported.
Meanwhile, China's expanding factory activity fanned hopes that crude demand could improve, as analysts waited to see if the world's second largest economy will add new stimulus measures for growth, the Wall Street Journal said.
The Organization of the Petroleum Exporting Countries and its OPEC+ allies will likely extend temporary oil production cuts for at least first quarter 2024, when the group meets to decide the matter Dec. 5, OPEC+ sources told Reuters.
"Market participants are closely watching to see if OPEC+ will focus on bolstering prices by extending production cuts or opt to defend its share of the global crude oil market by easing those cuts," said Satoru Yoshida, a commodity analyst with Rakuten Securities.
"The OPEC+ decision may prompt a short-term reaction, but the oil market is likely to rise by year-end on expectations of a U.S. economic recovery under the Trump administration and ongoing Middle East tensions," he said.
Saudi Arabia has a plan to keep prices elevated, but "increasingly fractious" OPEC+ members want to pump more and maximize short-term profits, The Wall Street Journal reported Dec. 3.
ANS fell 63 cents Dec. 2 to close at $70.99, as WTI fell 62 cents to close at $68.10 and Brent fell a dollar to close at $71.83.
On Dec. 4, ANS traded at a $2.93 cent premium over WTI, and at an 84-cent discount to Brent.
The Transportation Security Administration saw 3,087,392 people through security checkpoints nationwide Dec. 1 -- "the most screened in a single day over its 23-year history," the agency said in a Dec. 2 release. It was the second time that more than 3 million people were screened in a single day.
Dollar: Dose of moderation The dollar is playing its role in the marketplace, and of recent, its role has been moderation of crude prices. A dollar-denominated commodity such as oil is more expensive for buyers that must convert to an appreciated dollar to purchase crude -- unless the crude price falls to compensate.
The DXY dollar index had the dollar at 106.32 Dec. 4, a premium level far above its lows in September and October of 100 and change.
The dollar rose from its lows coming into the Nov. 5 election. After the election, a new momentum took the dollar to a year-to-date high of 107.55 Nov. 22 -- before a consolidation -- then a rally, which pegged the dollar at a multi-day range near 106.
In mid-November, analysts reckoned that the dollar was soaring due to market expectations of rising inflation rising out of proposed economic policies of the new administration.
On Dec. 2 the WSJ Dollar Index rose 0.6% as markets reacted to President-elect Trump's threat to enact 100% tariffs on Brazil, Russia, India, China and South Africa, the Wall Street Journal reported, adding that Trump wants the BRICS countries to shelve plans for a common currency to compete with the dollar.
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