The ICDX oil contract closed higher at $87.73 a barrel for the week ended Oct 13 due to conflict tensions in the Middle East and higher demand forecasts based on OPEC's global oil outlook.
A large-scale impromptu attack launched by Palestinian Islamist militant Hamas into Israel on Saturday triggered retaliatory airstrikes and a formal declaration of war from Israel on Sunday. The Hamas offensive was the widest and bloodiest in decades, killing more than a thousand people this weekend, with more than 600 Israelis killed by Hamas strikes and more than 400 Palestinians killed as Israel pounded Gaza with airstrikes. It is feared the situation risks developing into a wider war and disrupting oil supplies from the Middle East, home to nearly a third of global oil supplies.
Another positive sentiment came from the Global Oil Outlook 2023 released on 9/10. OPEC expects demand to be higher than pre-pandemic forecasts, so its forecasts for world oil demand for the medium and long term were also revised upward. Oil demand in 2045 is expected to reach 116 million bpd, up from the forecast in 2022. For medium-term demand from 2007 to 2028, it is expected to reach 109 million bpd and 110.2 million bpd respectively on the grounds of strong demand this year despite economic headwinds such as rising interest rates. OPEC also sees $14 trillion in investment needs through 2045, as needed to meet demand even as the use of renewable fuels and electric cars increases and more.
Meanwhile, what puts pressure on prices comes from the supply side of crude oil. The latest report released by industry group the American Petroleum Institute (API) showed U.S. crude inventories for the week jumped by 12.94 million barrels for the close week of Oct. 6. In addition, gasoline stocks were also reported to have increased by 3.65 million barrels. The increase in stockpiles indicates sluggish demand in the US energy market.
Expectations of U.S. sanctions relief for Venezuela on Venezuela's oil sector
At the 17/10 meeting, the U.S. and Venezuelan governments were reportedly preparing to sign an agreement in Barbados to ease U.S. sanctions on Venezuela's oil industry in exchange for a competitive, supervised Venezuelan presidential election next year, according to media reports. The easing of U.S. sanctions on Venezuela's oil industry has the potential to trigger an increase in Venezuelan oil supplies to global markets. Correspondingly, the Venezuelan government and its political opposition agreed on election guarantees for the 2024 presidential election, paving the way for possible waivers of U.S. sanctions that could boost oil supplies to global oil markets.
USA - API Crude Oil Stock Change
USA - EIA Crude Oil Stocks Change
USA - Fed Chair Powell Speech
Source: ICDX Research