The oil market settled higher yesterday, back above $50.00 after a brief two day losing streak, closing at $50.29. Heating oil and RBOB also finished higher at $1.5686 and $1.5057, respectively. This morning the market is moving higher on the heels of yesterday’s API data, which showed a substantial crude draw versus expectations of a build. Crude stockpiles fell 3.8 million barrels, far exceeding what was expected to be a build of 2.7 million barrels. Gasoline had an unexpected build of 929,000 barrels, while distillate stockpiles fell by 2.3 million barrels. Today’s Energy Information Administration figures released by the DOE offered further bullish support. Those figures showed a crude draw of 5.2 million barrels, a gas build of 2.5 million barrels and a distillate draw of 1.2 million barrels. In addition, Cushing, OK had a draw of 1.6 million barrels. As of this writing heating oil has gained ~ $.03 while RBOB is also up $0.0050.
Other factors adding strength to the market today are the weaker dollar index, Chinese September production dropping by 9.9%, and comments made by Saudi Arabia’s energy minister. Khalid al-Falih stated that oil markets were at the end of a considerable downturn as fundamentals were improving and supply and demand were rebalancing. In addition, the Saudi minister asked for non-OPEC producers to help the market stabilize, adding that their role was as important as the role of the OPEC members. “Market forces are clearly working after a testing period of sub-$30 oil prices,” said al-Falih. Crude prices have gained approximately 13 percent since September 27, when OPEC proposed its first freeze or production cut in eight years. Of course, many doubt whether OPEC will come to an agreement that all 14 member countries will ratify. On Monday, Iranian Vice President Eshaq Jahangiri was quoted saying that Iran needed to “regain its share of the global market.” This comment led Tyler Richey, co-editor of The 7:00’s Report to say that this “raised doubts about the actual possibility that OPEC will really make any progress in enacting a quota, because the policy simply doesn’t work without the cooperation of a major player like Iran.” OPEC’s next meeting will be held on November 30th in Vienna, Austria where more detailed production freeze/cut plans will be discussed. Until then, stay tuned.