Trade developments once again hit sentiment across markets yesterday, and it was no different for oil. President Trump suggested that a trade deal with China may only come after the election, and this has increased fears that the US could go ahead with imposing further tariffs on China on the 15 December.
Focusing on oil developments, and yesterday the OPEC+ Joint Technical Committee (JTC) met in Vienna ahead of the full ministerial meetings on Thursday and Friday. Reports suggest that deeper cuts were not discussed at the meeting, while compliance between OPEC+ members over October was reportedly 140%. Reports also suggest that the JTC is looking into Russia’s request to exclude condensate from its oil production cuts. Meanwhile, the Iraqi oil minister has once again suggested that OPEC+ will look at possibly deeper cuts and does not believe other members will be an obstacle to doing so. If all members were compliant with the deal this may be the case, however, with a number of members falling well short in cutting output, including Iraq, other members may be reluctant to cut further. The reassurance of stronger compliance will likely be needed before other members agree to deeper cuts.
Between trade and OPEC+ noise, the usual weekly US crude oil inventory numbers have fallen between the cracks for many in the market. However, API numbers reported yesterday were fairly constructive, with US crude oil inventories falling by 3.72MMbbls, which was more than the 1.5MMbbls draw the market was expecting (according to a Bloomberg survey). While on the product side, builds of 2.93MMbbls and 794Mbbls were reported in gasoline and distillate fuel oil respectively. These numbers suggest that refinery run rates picked up over the week, a trend that we would expect to continue, as refineries ramp up production following the turnaround season. The more widely followed EIA report will be released later today, and while the report may lead to an immediate price response, we believe attention will soon turn back to the OPEC+ meeting and any further news on the trade front.