Month in brief

• DOI: http://doi.org/10.1111/oet.12740
• Date: 01 November 2019
• Published date: 01 November 2019

THE MONTH IN BRIEF

Month in brief

The month began with a fall in prices, with levels dipping

to their lowest since mid-August, at just under $58/bbl.

Saudi Arabia said output had recovered and stocks were

being replenished after the drone attack on oil infrastruc-

ture around Abqaiq and Khurais. This allowed the

market focus fully on concerns over trade and economic

growth, which are hitting and oil demand growth and

depressing market sentiment.

In particular, the latest Chinese economic growth

numbers were below expectations, with third quarter

GDP up just 6% year on year—the lowest for many years.

The refinery maintenance season in North America

also cut demand for crude and other feedstocks. In the

first week of October, US crude inventories climbed 9.28

to 434.85 mn bbl, according to the EIA. Crude stocks

have risen 19 mn bbl over the past 5 weeks, as refiners

have reduced inputs by roughly 2 mn bpd.

On the supply side, continued US oil production

growth is being offset by reduced output from sanctions-

hit Iran and Venezuela, while OPEC compliance with

output quotas remained good overall in September, hel-

ped by a 1.28 mn bpd cut in Saudi output due to the

drone strikes, according to OPEC.

Prices saw little movement through early October,

but then half-way through the second week, levels

jumped, moving above the $60/bbl mark. This was

largely due to the United States and China announcing a

resumption of trade negotiations on Thursday 10th,

followed by the announcement of a partial agreement on

the Friday, covering agricultural purchases, financial ser-

vices, currencies, and IP.

Support also came from an announcement from

OPEC, Russia and their allies that they had not ruled out

deeper crude output cuts when they next meet 5 to

6 December in Vienna.

US crude stocks rose again in the second week as

maintenance gathered pace. US refiners cut operating

rates to 83.1% of capacity for the week ended 11 October,

down from 95.1% for the week ending 6 September,

according to the EIA. This helped push US stocks up

more than expected, leaving them at a 2.7% surplus to

the 5-year average.

At the beginning of the third week crude fell back,

dipping below $60/bl on the Monday and staying in the

high $50s all week, partly on doubts over the previous

week's US/China trade deal. Typhoon Hagibis closed

refineries in Japan, backing up crude deliveries and cut-

ting gasoline demand, which, along with another rise in

US crude inventories, also dampened crude market

sentiment.

In the fourth week, prices rose steadily as attention

switched to supply concerns, largely around US onshore

output growth, which is finally showing signs of slowing.

Concerns were also raised about non-OPEC output gen-

erally, given the lengthy period of low investment and

falling equity values. Brent ended the week at almost

$62/bbl, on support from a surprise draw in US stocks

and further indications that OPEC and its allies may be

considering deeper/longer output cuts.

The final week of October began with steady prices,

before they dipped midweek to just over $60/bbl on a US

crude stock rise and more bad economic news, along

with another downgrade in IEA oil demand forecasts.

Output of almost 400 000 bpd from Norway's new Johan

Sverdrup field by December—well ahead of schedule—

was also bearish.

How to cite this article: Month in brief. Oil and

Energy Trends. 2019;44:6. https://doi.org/10.1111/

oet.12740

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