Following a significant dip of 3.97% on Tuesday, WTI crude oil prices are slightly higher on Wednesday. The cost of Brent crude is also higher. A risk-on trend in equities markets has been sparked by a peak in Federal Reserve rate rise wagers. Peak hawkishness would typically be good for commodities like crude oil, which are demand-sensitive, but persistent and growing recession fears have held prices back.
A further directive for the release of an extra 15 million oil barrels from the Strategic Petroleum Reserve (SPR) in December is anticipated on Wednesday from the Biden administration. The answer is probably in response to OPEC's production cut, which the White House characterized as a political gimmick. However, with the additional SPR release and the approaching midterm elections, Biden also seems to be acting with political intentions.
Nevertheless, it is anticipated that demand would decline over the winter as the effects of rising worldwide rates spread throughout the world economy. The US Energy Information Administration (EIA) will release new inventory data tomorrow, which traders will review. For the week ending October 14, an increase of 1.38 million barrels is projected by the consensus. Energy traders are becoming increasingly concerned as distillate stockpiles, which includes diesel fuel, are decreasing.
US exports to Europe have risen. Distillate stocks are expected to decline by 2.17 million barrels, marking the fourth consecutive weekly decline, according to analysts. Additionally, it is expected that gasoline supplies would decline; the consensus projection calls for a 1.11 million barrel drop.
An excessive demand for either could raise pump costs. A prohibition on oil exports is allegedly something the Biden administration is thinking about. Although it's uncertain if it would damage European Union members, it's unlikely to have the desired effect at home. That would use up a lot of political capital, which Biden might want to keep stashed away because the possible advantage of cheaper prices at home would probably be outweighed by the suffering it would inflict on EU partners.
Examining some significant crack spreads in the oil market reveals that the demand for refined goods may have peaked. The announced SPR releases are probably a contributing factor in the recent moderation of the 3:2:1 and 1:1 crack spreads. The prices of crude oil, from which those goods in the spreads (heating oil and gasoline) are refined, should be hampered if those trends continue.
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