OIL FUTURES: Crude edges higher on tightened supply, demand outlooks

Crude oil futures settled higher Oct. 29 as the market eyed continued near-term supply deficits and bullish demand outlooks.

NYMEX December WTI settled 76 cents higher at $83.57/b and ICE December Brent climbed 6 cents to settle at $84.38/b.

OPEC+ producers are increasing oil production "very, very slowly," and sustained high prices threaten economic recovery across the world, the US State Department's top energy diplomat said Oct. 29.

Amos Hochstein, senior adviser for global energy security, said he hoped OPEC+ producers were listening to consumer nations' concern about high prices as they prepare to meet Nov. 4.

"We see a tight market, that [demand] growth is happening quite fast," he said at an event at the Center for Strategic & International Studies in Washington. "The economic recovery has been remarkable but fragile. And what we don't want is in the middle of a global recovery to imperil that recovery and to threatened that recovery due to energy prices."

OPEC and its allies appear set to reaffirm plans to increase crude production by 400,000 b/d in December after an advisory committee saw no major changes in the market's supply/demand outlook.

"Crude oil pared earlier losses after reports that OPEC is expecting a tighter oil market in coming months," ANZ research analysts said on Oct. 29, adding that the preliminary figures being evaluated by its Joint Technical Committee suggest world oil inventories will decline by an average 1.1 million b/d in the fourth quarter.

NYMEX November RBOB rallied 2.70 cents to $2.4620/gal but November ULSD gave back 2.01 cents to settle at $2.4964/gal.

"Impressive earnings results from Exxon and Chevron showed the oil giants are overflowing with cash, but are redirecting that towards dividends and buybacks, refraining investments in new wells," OANDA senior market analyst Ed Moya said in a note. "The oil market deficit might only be 300,000 barrels a day this quarter, but the risks of a demand surge remain elevated."

Tight near-term US supply outlooks has sharply widened backwardation in crude oil forward curves. The second-month WTI contract settled at a $1.79/b discount to front-month -- the widest backwardation in that part of the curve since July 2018.

"Restrained output from both OPEC+ and US shale producers over the last 18 months have kept global oil supply consistently below demand since June 2020," analysts from J.P. Morgan said in its Global Commodities Research report on Oct. 29.

Libya, Nigeria outages backstop prices

Also putting a floor under prices were reports of outages in Libya and Nigeria. In Libya, production of the country's Es Sider crude has plunged 72% and will continue to decline for 10 days due to a pipeline leakage. Waha Oil is currently producing 77,000 b/d of Es Sider crude, down from 285,000 b/d production capacity, state-owned National Oil Corp. said in an Oct. 27 statement.

In Nigeria, Shell declared force majeure on Bonny Light crude loadings Oct. 25 due to the shutdown of the Nembe Creek Trunk line, a key pipeline for the grade, a spokesperson said Oct. 27. Bonny Light is one of Nigeria's main export grades, but the 150,000 b/d Nembe Creek Trunk Line -- a pipeline feeding the grade's export terminal, operated by Aiteo Exploration and Production Limited -- has come under repeated attack from militants. Loading volumes are typically around the 250,000 b/d mark, in the absence of disruption.