Russia will shut down more refining capacity than expected
November 20, 2024
The API inventory report released yesterday afternoon reported crude oil stocks up 4.753 million, gasoline stocks down 2.480 million, and distillates down 688,000 barrels.
The average estimates for today’s DOE inventory report show crude down 49,000 barrels, gasoline down 85,000 barrels, and distillates down 23,000 barrels.
HSBC said it expects OPEC+ to announce another three-month extension of the prodctuion cuts until April 2025. It said OPEC’s three-month extension would reduce the scale of the potential oversupply of oil in 2025. It said a longer extension cannot be ruled out but does not solve the spare capacity overhang.
Russian President Vladimir Putin approved an updated nuclear doctrine, saying that Russia could consider using atomic weapons if it was subject to a conventional missile assault supported by a nuclear power. The decision to change Russia’s official nuclear doctrine is the Kremlin’s response to a reported decision by the administration of US President Joe Biden to allow Ukraine to fire American long-range missiles into Russia.
According to Reuters calculations, Russia plans to shut down 2.42 million metric tons of refining capacity in November, up 34% from its previous plans. This will decrease the amount of crude oil available for export.
WTI crude oil is at $70 per barrel. This is a psychological resistance level, and it was interesting that the news of escalation in the war was not enough to push prices through that $70 level. Today, it is flirting with moving above that level, but at this point, I cannot say that the bulls are just jumping on board, and away it goes higher. We are in for a continued grind, as we have seen as the market tries to determine a near-term or even a longer-term trend. Crude prices have been roughly $65-$75 for the last three months, which looks to continue in the medium term. Crude prices rallied over $2 on Monday, but in the bigger picture, they are still at the bottom of the range, and if they can get above $70, they may work the way back toward the middle of that range. The chart is a weekly chart of WTI crude oil.