NEW YORK (BLOOMBERG) – Brent oil declined from its highest level since 2018 as a US industry report pointed to an increase in crude stockpiles and China unleashed measures aimed at stabilizing its power supplies for the winter.
Futures in London fell below US$85 a barrel amid a broader drop in raw materials including aluminum and copper.
China is studying ways to intervene in the coal market to ensure reasonable prices, while the nation’s energy watchdog hosted a Tuesday meeting with refiners after oil prices soared.
The American Petroleum Institute reported crude inventories rose by 3.29 million barrels last week, according to people familiar, though the industry group reported another large decline at the key storage hub of Cushing, Oklahoma.
Inventory draws there have seen the market structure of US crude futures rocket higher, with the much-watched spread between the nearest two December contracts touching US$10 a barrel this week, its strongest since 2013.
Oil has advanced for the past eight weeks as the energy crisis – prompted by shortages of natural gas and coal – coincided with a rebound in demand from key economies emerging from the pandemic.
Wall Street has been steadily upping its estimates for oil prices in recent weeks, with Morgan Stanley the latest bank to do so, calling for US$95 Brent in the first quarter of next year. It is possible that oil will hit US$100 a barrel this winter, according to commodities trader Mercuria Energy Group.
“The only thing it feels similar to is 2008, that was more oil focused than gas or power, but there was a similar panic about running out of energy,” said Callum Macpherson, head of commodities at Investec Plc.
“There’s obviously been curtailments of industry here in Europe, and there are all kinds of problems in China with power cuts, but when I look at the equity markets there doesn’t seem to be much worry about it.”
US gasoline and distillate stockpiles – a category that includes diesel – both declined last week, the API said. The median estimate in a Bloomberg survey forecast the Energy Information Administration will report nationwide crude inventories increased by 2 million barrels.
