Crude Outlook: Last of 2023

As we close the chapter on 2023, the last three weeks have revealed a compelling narrative in the U.S. petroleum market, accompanied by notable movements in West Texas Intermediate (WTI) and Brent crude oil prices. Let’s delve into the key highlights and their implications for the energy landscape.

U.S. Petroleum Market Overview:

Over the three-week period ending December 22, 2023, U.S. crude oil refinery inputs demonstrated resilience, averaging 16.6 million barrels per day. This reflected a marginal increase of 109 thousand barrels per day from the previous week. Refineries operated at 93.3% of capacity, underlining robust production levels.

Inventories and Supply Dynamics:

Crucial indicators like crude oil inventories and product supplied portrayed a mixed picture. U.S. commercial crude oil inventories witnessed a substantial decrease of 6.9 million barrels, reaching 436.6 million barrels—approximately 1% below the five-year average. Motor gasoline inventories decreased, distillate fuel inventories increased, and total commercial petroleum inventories saw a significant decline of 17.3 million barrels.

Over the four-week period, total products supplied averaged 20.7 million barrels a day, marking a slight decline of 0.5% from the same period last year. Motor gasoline product supplied, however, showed resilience with a 1.6% increase, while distillate fuel product supplied experienced a modest 0.8% uptick.

Price Movements and Global Context:

The West Texas Intermediate crude oil prices is down 9.75% YTD. Meanwhile, Brent crude oil is down 10.55% YTD. This aligns with the broader trend in oil prices, which are poised to end the year approximately 10% lower—a notable contrast to the previous two years.

Geopolitical concerns, production cuts, and global measures to combat inflation have contributed to this decline. The oil market, marked by wild fluctuations, at their current levels are set to conclude the year at the lowest year-end points since 2020, a period marked by the pandemic’s impact on demand, resulting in a sharp decline in prices.

Global Supply and Demand Dynamics:

Amidst the complex geopolitical landscape, oil prices stabilised after a 3% fall, with concerns arising from shipping firms avoiding Red Sea routes due to Houthi attacks. However, the conflict in the Middle East, coupled with production cuts, hasn’t been sufficient to counterbalance demand concerns, leading to the third consecutive monthly fall in oil prices.

The September surge in prices, driven by OPEC+ production cuts, raised expectations of demand outpacing supply. Yet, the current scenario underscores how swiftly market dynamics can shift, with concerns over global demand taking precedence.

Looking Ahead: Impacts on 2024:

While the oil market navigates the complexities of supply, demand, and geopolitical tensions, analysts anticipate a potential boost in oil demand in 2024. Expected interest rate cuts in major consuming regions and a weaker dollar are identified as factors that could positively influence oil demand, providing a ray of optimism amid the current uncertainties.

Conclusion:

The last weeks of 2023 have provided a multifaceted view of the U.S. petroleum market, reflecting the intricate dance between production, inventories, and global market dynamics. As we anticipate the dawn of 2024, stakeholders will closely monitor how these factors evolve, shaping the trajectory of the energy sector in the coming year.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.