Oil prices slipped on Thursday as inventories in the US rose more than expected last week, while Chinese imports continued to remain under pressure.
Prices had briefly risen earlier on Thursday as Donald Trump’s win in the US presidential election raised concerns over supply from Iran.
Trump is likely to pursue stricter enforcement of sanctions on Tehran’s oil supplies to other countries.
Moreover, an approaching storm, named Rafael in the US Gulf of Mexico continued to put supply from the region at risk.
This nullified the impact of a strong dollar.
The dollar had surged on Wednesday after Trump’s victory over Vice President Kamala Harris in the 2024 presidential elections.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was down 0.6% at $71.28 per barrel.
Brent crude on the Intercontinental Exchange was at $74.66 per barrel, down 0.3% from the previous close.
Rising inventories and weak China imports weigh
Shrugging off supply risks, oil prices fell as the US Energy Information Administration said inventories in the country rose by 2.1 million barrels last week.
This was more than analysts expectations of just 300,000 barrels rise in the week ended November 1.
Gasoline and distillate stocks also rose sharply in the week ended November 1 as exports slumped by more than 1.4 million barrels last week, the data showed.
Meanwhile, production of crude oil in the world’s largest producer remained unchanged at record levels at 13.5 million barrels per day, EIA said in its weekly report.
Warren Patterson, head of commodities strategy at ING Group, said:
While refines increased their utilisation rate by 1.4pp over the week, a 1.41m b/d WoW decline in crude oil exports would have helped to contribute to the crude build.
Meanwhile, China’s imports of oil fell 4.9% on a month-on-month basis in October to 10.56 million barrels per day, Patterson said.
This was also nearly 9% lower than the same period last year.
“This leaves cumulative imports so far this year down 3.4% YoY. These numbers will do little to ease Chinese demand concerns,” Patterson added.
Uncertain impact of Trump presidency
The oil markets continue to trade with cautiousness in the aftermath of the election results on Wednesday.
Even as a Trump presidency is expected to squeeze oil supply from Iran, the pro-policy of the Republican towards more drilling on federal US lands could add to bearishness in oil prices.
Patterson noted:
A Trump administration could see an increase in oil and gas leasing on federal land, which had fallen significantly under Biden.
However, US supply growth is going to remain largely price-dependent.
In the short term though, stricter sanctions on Iran and Venezuela could see supply of around 1 million barrels per day of oil being wiped off from global markets.
Under the current US President Joe Biden’s administration, both Iran and Venezuela had enjoyed some leeways in terms of oil exports.
Rafael approaches Gulf of Mexico
In North America, Hurricane Rafael intensified into a category 3 storm on Wednesday.
According to a report from ING Group, a little over 304,000 barrels per day of oil production has already been shut in the Gulf of Mexico region.
Additionally, 131 million cubic feet per day of natural gas production has also been shut in the region, ING said in the report.
In case of further disruptions from the region, oil prices are likely to get some support. Brent could move back over $75 per barrel, while WTI prices may climb over $72 per barrel later on Thursday.
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