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OIL FUTURES: Brent tests $85/b threshold as demand recovery pressures supply outlooks

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OIL FUTURES: Brent tests $85/b threshold as demand recovery pressures supply outlooks

Highlights

ICE Brent crosses $85/b

Global mobility hits fresh pandemic high

NYH RBOB cracks rally as USAC stocks fall

Crude futures settled at fresh multi-year highs Oct. 15 as a continued recovery in global energy demand added pressure to near-term supply outlooks.

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NYMEX November WTI settled 97 cents higher at $82.28/b and ICE December Brent rallied 86 cents to $84.86/b.

"Crude prices are rallying after another round of strong earnings and economic data suggests the economy can still handle the current surge in energy prices," OANDA senior market analyst Ed Moya said in a note. "It will take a trifecta of events to derail this oil price rally: OPEC+ unexpectedly boosts output, warm weather hits the northern hemisphere, and if the Biden administration taps the strategic petroleum reserves. "ICE Brent made several pushes above the $85/b level in both overnight and morning trading, briefly reaching a session high of $85.10/b. Front-month ICE Brent last traded above that level intraday Oct. 10, 2018.

NYMEX November RBOB settled 5.14 cents higher at $2.4864/gal and November ULSD climbed 1.23 cents to $2.5737/gal.

Global mobility, a key barometer for gasoline, diesel, and jet demand, averaged 7.8% below pre-coronavirus pandemic levels in most of the world's top oil users, excluding China, in the week ended Oct. 10, according to the latest Google data. The data shows mobility at a new post-pandemic high in the first week of October despite a seasonal slowdown in Western Europe, where supply bottlenecks and rising energy costs are also crimping activity.

A sharp increase in natural gas and coal prices worldwide is putting further pressure on supply and demand balances, a situation that is "particularly fueling upside momentum in Brent crude and heating oil, which can be exacerbated by up to 1 million [b/d] of incremental winter demand due to natural gas switching for crude and fuel oils," TD Securities analysts said in an Oct. 15 note.

Meanwhile, seasonal refinery maintenance is trimming runs and adding additional pressure to global refined product inventories, and widening crack spreads.

The ICE New York Harbor RBOB crack versus Brent climbed to $16.87/b in afternoon trading, up from $16.06/b the session prior and on pace for the highest close since Aug. 30. The ICE NYH heating oil spread versus Brent was holding around $22.86/b late Oct. 15, down 25 cents from the session prior but still near six-year highs.

Planned work is underway at Irving Oil's Saint John, New Brunswick, refinery, tightening gasoline and diesel stocks in the northern US Atlantic Coast states, while a leak in Kinder Morgan's product pipeline in Alabama reduced inventories in southern USAC states.

The ICE New York Harbor RBOB crack versus Brent climbed to $16.87/b in afternoon trading from $16.06/b the session prior and on pace for the highest close since Aug. 30.

US Atlantic Coast gasoline stocks fell 580,000 barrels to 57.22 million barrels in the week ended Oct. 8, US Energy Information Administration data showed Oct. 14.