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Oil steadied after a steep drop as rising Russian flows and higher US output added to concerns that supply is running ahead of demand.
Global benchmark Brent traded near $73 a barrel after shedding almost 4% on Tuesday, while West Texas Intermediate was above $68. The weekly average of Russia’s seaborne crude exports jumped to the highest level since early July, while the US raised its estimate for output over this year.
Timespreads continue to indicate an oversupplied market. Brent and WTI futures are in bearish contango structures through to the middle of 2024, with prompt barrels at discounts to later ones. WTI’s 12-month spread dipped into contango on Tuesday for the first time in a year.
Crude has retreated by about a quarter since late September, with a recent plan by OPEC+ to deepen output cuts failing to stem the slide amid skepticism that the group’s members will fully adhere to the voluntary reductions. Adding to the bearish outlook, Chinese crude consumption growth is forecast to slow next year, and there’s also the possibility that the US will enter a recession.
Oil is facing “a US-led bump in non-OPEC supply and doubts over OPEC compliance colliding with some prospects of demand softening,” said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank Ltd. in Singapore.
US crude oil production in 2023 is forecast at 12.93 million barrels a day, an increase of 300,000 barrels a day from the previous forecast, the Energy Information Administration said in its monthly outlook. Separately, the American Petroleum Institute reported oil stockpiles at the Cushing, Oklahoma, hub rose by 1.4 million barrels, according to people familiar with the figures.
The Organization of Petroleum Exporting Countries releases its monthly market report later Wednesday, while the Federal Reserve is set to make its final rate decision of the year. On Thursday, the Paris-based International Energy Agency will publish its monthly outlook.
