U.S. oil prices give up gains to finish flat ahead of government data on crude supplies

By Myra P. Saefong and William Watts

IEA raises outlook for oil demand growth

Oil futures ended Tuesday on a mixed note, with U.S. benchmark prices flat and global crude prices down a nickel, as traders awaited a report due Wednesday from the Energy Information Administration covering two weeks' worth of petroleum supply data.

Oil prices gave up early gains that had followed a report from the International Energy Agency which raised the outlook for 2024 growth in oil demand. U.S. prices had also found early support from weakness in the dollar in the wake data showing U.S. inflation was unchanged in October.

Price action

West Texas Intermediate crude CL00 for December delivery CL.1 CLZ23 settled flat at $78.26 a barrel on the New York Mercantile Exchange after trading as high as $79.77.January Brent crude BRN00 BRNF24, the global benchmark, lost 5 cents, or nearly 0.1%, to settle at $82.47 a barrel on ICE Futures Europe.December gasoline RBZ23 declined by 0.6% to $2.22 a gallon, while December heating oil HOZ23 shed nearly 0.1% to $2.84 a gallon.Natural gas for December delivery NGZ23 settled at $3.11 per million British thermal units, down nearly 2.9%.

Market drivers

"It seems like a combination of the less optimistic demand outlook in the IEA's monthly outlook report, and trader positioning into a double dose of weekly EIA data releases" Wednesday led to oil to come off session's price highs, said Tyler Richey, co-editor at Sevens Report Research.

Still, "based on the risk-on tone in equity markets so far in November amid soft landing hopes, risks are skewed to the upside into the end of the week pending good consumer demand readings for refined products in the EIA data," he said told MarketWatch.

The EIA report will include supply data covering two weeks -- for the weeks ended Nov. 3 and Nov. 10 -- after a planned systems upgrade led the EIA to delay last week's report releases.

On average, analysts polled by S&P Global Commodity Insights forecast a climb of 4.5 million barrels in U.S. commercial crude supplies for the two weeks ending Nov. 10. They also forecast two-week inventory declines of 1.3 million barrels for gasoline and 2.7 million barrels for distillate supplies.

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Meanwhile, on Tuesday, the IEA, which "notoriously has underreported demand in the past is now saying the global oil demand is going to hit a record high of 102 million barrels a day in 2023," said Phil Flynn, senior market analyst at The Price Futures Group, in a daily note.

The Paris-based IEA on Tuesday raised its forecast for growth in demand this year by 100,000 barrels a day to 2.4 million barrels a day, which would take total demand to an average of 102 million barrels a day.

However, the IEA expects demand and supply to temper next year, as the effects of slower global growth and high interest rates take hold.

Supply overall is expected to rise by 1.6 million barrels a day, taking average supply to 103.4 million barrels a day. Meanwhile, demand in 2024 is expected to rise by 930,000 barrels a day, taking average demand to 102.9 million barrels a day, leading to a small surplus.

Oil had been due for a bounce after an "extreme" selloff that last week took WTI and Brent to their lowest levels since mid-July, Warren Patterson and Ewa Manthey, commodity analysts at ING, said in a Friday note.

"While fundamentals may not be as bullish as initially thought, they are still supportive, with the market likely to be in deficit for the remainder of this year," they wrote. "The surplus we see early next year could even be erased if the Saudis roll over their additional voluntary supply cuts."

Saudi Arabia in July implemented a cut of 1 million barrels a day that it has extended through the end of the year The reduction was on top of existing cuts by OPEC+, which is made up of the Organization of the Petroleum Exporting Countries and its allies. A Nov. 26 OPEC+ meeting will be watched to see if cuts are extended into 2024.

-Myra P. Saefong -William Watts

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11-14-23 1513ET

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