The oil market closed down across the board yesterday as all three major indexes reflected a bearish report from the Energy Information Administration, as well as increasing doubt over the impact of the OPEC/Russian production cuts. While crude inventories fell 2.4 million barrels, gasoline and distillate stocks increased by 3.4 million barrels and 2.5 million barrels respectively, which were greater builds than what was expected. Crude finished the session at $49.77, down $1.16 with RBOB closing down $0.0277 and diesel off $0.0195.
Yesterday, WTI crude closed down $0.86 to $50.93/bbl, HO closed down $0.0192 to $1.6379/gal, and RBOB finished down $0.0216 to $1.5359/gal. The market was correcting itself from last week after the reports that OPEC’s November production was at a record high. Last week the market rallied because of all the rhetoric around OPEC’s production cuts, but it now seems very unlikely that OPEC will follow through on those cuts. Another piece to rebalancing the market has to come from non-OPEC countries. There is a meeting in Vienna this Saturday to discuss if non-OPEC countries will agree to cut 600,000 barrels per day.
The OPEC meeting has come and gone and the market has been up for a week straight, until today. With November now over, OPEC reported that production increased to 34.19 million barrels per day last month, which is close to 2 million barrels over the agreed-upon level set to begin in January. Don’t forget that OPEC posted big numbers for production in October as well, at 33.82 million barrels per day. OPEC was not the only group that increased production in November; Russia did as well. Russia is busy setting records and hit a new 30-year high at 11.21 million barrels per day. Russia’s output of 11.21 million bpd combined with OPEC’s 34.19 million bpd were enough to cover nearly half of the global oil demand of 95 million bpd.
Last week’s OPEC-driven gains are continuing this morning as we see WTI crude up an additional 1%. However, a new hot topic could be the culprit to this morning’s rally. The Organization of the Petroleum Exporting Countries have invited non-members to attend a meeting on December 10th, also in Vienna, to discuss their supply cuts. These non-members, 14 in total whose production accounts for roughly a fifth of the world’s total, include nations such as Egypt, Mexico, Russia, and Oman.