Eurozone Business Activity Contracts, Prompting Recession Speculation
October 25, 2023
The API reported their inventory update yesterday late afternoon, and it had crude oil stocks down 2.7 million barrels, gasoline stocks were down 4.2 million barrels, and distillate stocks were down 2.3 million barrels.
The average estimates for today’s EIA inventory update from the Bloomberg survey is for crude stocks to be down 1.321 million barrels, gasoline inventories down 1.511 million barrels, and distillates down 2.060 million barrels. Refinery runs are estimated to be up 0.6% to 86.1% of capacity.
Energy prices were under selling pressure yesterday on weak economic data from the UK, EU, and Germany implying lower fuel demand. Also helping the downside is Israel so far waiting to act on their ground offensive as more countries are calling for a humanitarian pause. The hope is that this will allow for more time to try and free more hostages.
Eurozone business activity contracted more in October but was expected to rise. The risk of recession is rising in Europe ahead of the Bank of England’s interest rate decision next week.
From Bloomberg: The group of oil majors (OPEC+) has kept a tight lid on supply since the summer after price flagged, but it could change course if other Middle Eastern producers are dragged into the conflict, said Faith Birol, executive director of the International Energy Agency.
The average estimate for today’s propane inventory update is for stocks to increase by 420,000 barrels.
JP morgan sees Brent crude at $85 per barrel at the end of the fourth quarter and $83 per barrel at the end of the first quarter of 2024. It forecast WTI at $81 per barrel at the end of the fourth quarter and at $79 per barrel at the end of the first quarter.
Barclays see limited immediate impact from sanctions relief for Venezuela with an anticipated production increase implying a $2 per barrel downside to its $99 per barrel fair value estimate for Brent in the fourth quarter. It said, “Material physical disruption in oil supplies remains a tail risk and is being priced as such.” It said, “There is little war premium in oil prices currently, and justifiably so, in our view.”