Crude oil prices were on course for another weekly decline today as worries about a supply overhang deepened amid reports of record crude oil volumes going into floating storage and despite the first signs of disruption in outbound Russian oil flows following the latest U.S. sanction push.
At the time of writing, Brent crude was trading at $63.69 per barrel and West Texas Intermediate was changing hands for $59.73 per barrel. Both benchmarks were up from Thursday but down from the start of the week as traders focused on supply.
There have been reports about growing volumes of oil in transit, with Windward reporting that oil on water has reached a record high this month, driven both by anti-Russian sanctions that target, among other things, tankers, and by “extra Middle East cargoes”. Reuters, meanwhile, quoted Gunvor’s chief executive as saying that oil in floating storage was running at record high because of sanctions on Russian and Iranian crude but that record amount in floating storage was keeping the global market in balance, preventing a glut.
“This is unprecedented, the size of that. Therefore, obviously, if all sanctions would disappear, this market would clearly be quite oversupplied,” Torbjorn Tornqvist said at the ADIPEC energy conference in Abu Dhabi.
Meanwhile, the U.S. Energy Information Administration contributed to the oil price headwinds by reporting an unexpected build in crude oil inventories, and not a small one, at 5.2 million barrels for the week to October 28. “This has been amplified by risk-aversion flows, bolstering the dollar and the ongoing U.S. government shutdown, which continues to cloud economic activity,” IG analyst Tony Sycamore told Reuters.
ING analysts, meanwhile, said that they would not be revising their forecasts for oil markets until it became clear just how much Russian oil flows will be disrupted after the U.S. sanctions go into effect later this month, noting China had continued to buy Iranian and Venezuelan oil despite comparable sanctions against those two countries.
By Irina Slav for Oilprice.com
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