Fed Comments Contribute to Selling Pressure
December 1, 2021
Jerome Powell added to the selling yesterday as he commented that tapering of the Fed’s assets purchases would likely happen sooner than expected next year on the back of the strengthening economy. He also said that it was pretty clear that the thought of “transitory” is now long gone and inflation is real and here to stay.
After the serious dump that energy prices took a near-term bounce is always a possibility and the market has bounced up hard so far today. OPEC meets this week, and some may take a chance at buying now in hope that OPEC will hold back barrels from the market in response to the SPR release.
RBC Capital Markets analysts said the arrival of the omicron variant and the ensuing oil price sell-off has increased the odds of OPEC+ opting to pause a planned 400,000 BPD monthly production increase when they meet on Thursday. OPEC forecasters are suggesting that stocks could increase following a coordinated stock release by the US and other oil-consuming nations.
API reported that crude stocks were down 747,000 barrels and Cushing, Ok crude stocks were up 1.0 million barrels. Gasoline stocks were up 800,000 barrels and distillates were up 2.2 million barrels. Propane inventories are estimated to be down 1.164 million barrels.
The US EIA reported that US oil production in September fell by 380,000 BPD to 10.809 million BPD from a revised level in August of 11.189 million BPD.
The uncertainty of omicron and the Fed’s more hawkish outlook are the main factors pressuring prices lower. The OPEC+ meeting is a potential bullish factor. The market is likely to continue with this very high volatility but settle into congestion and buy time to see how these factors play out moving forward.