|
ANS ascent choppy
Jumps in US crude inventory and dollar index squelch nascent rally
Steve Sutherlin Petroleum News
Alaska North Slope crude was impeded in its claw back toward $75 per barrel by a surprise jump in U.S. crude inventories Oct. 23, falling 66 cents on the day to close at $73.92. West Texas Intermediate dropped $1.32 to close at $70.77 and Brent dropped $1.08 to close at $74.96.
Crude oil fell under further pressure as the dollar index lifted to its highest level since July. A strong dollar can inhibit demand for dollar-denominated oil from buyers that must convert other currencies.
(See chart in the online issue PDF)
Prices had been marching higher earlier in the week as traders warily watched the situation in the Middle East as conflicts on multiple fronts renewed fears of a risk of escalation causing disruption of crude supplies from the area.
ANS jumped $1.27 Oct. 22 to close at $74.57, while WTI leapt $1.53 to close at $72.09 and Brent vaulted $1.75 to close at $76.04.
On Oct. 21, ANS jumped $1.18 to close at $73.30, WTI jumped $1.34 to close at $70.56 and Brent jumped $1.23 to close at $74.29.
U.S. commercial crude oil inventories not including the Strategic Petroleum Reserve increased on the week ending Oct. 18 by 5.5 million barrels to 426.0 million barrels -- 4% below the five-year average for the time of year, according to U.S Energy Information Administration data released Oct. 23.
The inventory build dwarfed the expectations of analysts answering a Reuters poll for a 270,000-barrel rise. Analysts polled by The Wall Street Journal had predicted inventories would build by 800,000 barrels.
The EIA said crude imports had risen over the week by 902,000 barrels per day to 6.4 million bpd, while exports were little changed.
The build may have come in part because of disruptions to the supply chain and interruption of daily activities in Florida and neighboring states in the wake of a pair of hurricanes.
Total motor gasoline inventories added 0.9 million barrels for the period to 213.6 million barrels -- 3% below the five-year average for the time of year, the EIA said. Distillate fuel inventories fell however, by 1.1 million barrels to 113.8 million barrels -- 9% below the five-year average for the time of year.
The Wall Street Journal poll had predicted a 1.3 million barrel decline in gasoline inventories while calling for a 1.6 million barrel decline in distillate levels.
ANS off 7% for week ending Oct. 18 Crude prices fell Friday Oct. 18 to cap a week of losses that saw ANS fall more than 7% on Chinese demand concerns, along with reports that Israel might spare Iran's oil and nuclear facilities in any retaliation for a barrage of missiles Iran sent its way earlier in October.
ANS dropped $1.37 Oct. 18 to close at $72.12, as WTI dropped $1.45 to close at $69.22 and Brent dropped $1.39 to close at $73.06. ANS closed at $77.38 Oct. 14.
On Oct. 17 ANS rose 16 cents to close at $73.49, WTI added 28 cents to close at $70.67 and Brent rose 23 cents to close at $74.45.
From Wednesday to Wednesday, ANS gained 59 cents from its close of $73.33 Oct. 16 to $73.92 Oct. 23.
On Oct. 23, ANS traded at a $3.15 premium over WTI and Brent traded at a $1.04 premium over ANS.
As Petroleum News went to press early Oct. 24, WTI and Brent were each up more than 1.5%.
A golden moment for crude? New record highs for gold may signal that a significant crude rally is in the cards.
Crude oil is undervalued based on the ratio of gold prices relative to crude, according to Bryan Rich, Forbes contributor and founder of the Billionaire's Portfolio.
Rich had a look at gold prices relative to WTI crude oil in the Oct. 21 edition of Pro Perspectives.
"We are at an historic extreme, where the price of gold is 39 times the price of a barrel of WTI crude oil," Rich said. "If we look back over 75 years of data, these extremes in the ratio were resolved (i.e. turning point in the ratio) in each case by a sharp rise in the price of crude oil."
Goldman Sachs also sees a rise in the price of crude, but not a particularly sharp one.
Goldman expects oil prices to average $76 per barrel in 2025 on a moderate crude surplus and spare capacity among major producers, combined with lowered concerns over Iranian supply disruptions, the bank said in an Oct. 22 note reported the same day by Reuters.
"Overall, we still see the medium-term risks to our $70-85 barrel range as two-sided but skewed moderately to the downside on net as downside price risks from high spare capacity and potentially broader trade tariffs outweigh upside price," Goldman said, adding that prices could rise into year-end as Brent time spreads underprice "physical tightness somewhat."
"Despite large global spare capacity and so far undisrupted Iran oil production, we don't think that a 2025 supply glut is a done deal," Goldman said.
Israel-Iran tensions have not affected Middle East oil supply, and spare capacity is high among producers in the Organization of Petroleum Exporting Countries and its oil exporting allies, Goldman said, adding that supply risks will persist as long as the conflict in the Middle East is unresolved.
| 