OPEC Secretary General Haitham al-Ghais said on Wednesday that the organization is ready to “intervene for the benefit of oil markets”, Saudi-owned Al-Arabiya TV reports, citing Ghais as saying that OPEC is aware, cautious and monitoring economic developments worldwide. In early October, OPEC+ announced plans to reduce oil production by 2 mb/d in November 2022 from the August 2022 required production level, a move that angered President Joe Biden who lambasted the organization for colluding with Russia to keep oil prices high. If the plan is implemented, Saudi Arabia and Russia should produce 10.5 mb/d in November 2022; the production of the OPEC 10 group members should reach 25.4 mb/d while that of non-OPEC producers should be 16.4 mb/d. This in effect would lead to the production of OPEC+ coming to an average of 41.9 mb/d. Further, OPEC and its non-OPEC allies including Russia agreed to extend their cooperation, which was set to end on 31 December 2022, by another year. After an initial bump, oil prices have cooled since the announcement partly because the impact of the production cut is likely to be limited with many members already struggling to meet quotas and also due to economic uncertainty and China doubling down on its zero-Covid policy both of which are likely to hit demand. OPEC has predicted that China’s oil demand will decline by 60,000 barrels per day this year, after forecasting an increase of 120,000 b/d only a month ago thanks to new lockdowns.OPEC has cut its demand growth view for 2022 by 460,000 bpd to 2.64 million bpd and for 2023 by 360,000 bpd to 2.34 million bpd, citing “the extension of China’s zero-Covid-19 restrictions in some regions, economic challenges in OECD Europe, and inflationary pressures in other key economies.”
U.S. Diesel Inventories Hit Historic Lows At The Worst Possible Time
U.S. distillate stocks, which include diesel and heating oil, have slumped to their lowest level for this time of the year since 1951, just as the heating season starts and the EU embargo on Russian oil product imports kicks in in February. Despite a small build in America’s distillate inventories last week, the levels are still at their lowest level since 1951, according to Financial Times estimates. The historically low stocks have pushed diesel prices much higher than the smaller rises in gasoline and crude oil this year. Since diesel is the primary fuel of the economy and long-haul transportation, the high diesel prices continue to fuel inflation. In the week ending November 11, distillate fuel inventories increased by 1.1 million barrels and are about 15% below the five-year average for this time of year, the EIA said in its weekly inventory report on Wednesday. At 107.4 million barrels, those stocks are the lowest ever seen for this season of the year. “The bulk of the increase in distillate stocks was on the US East Coast. And while this is helpful, stocks in the region are still at their lowest levels on record for this time of year,” ING strategists said on Thursday, commenting on the EIA inventory data. Very low diesel stockpiles and lower refining capacity since the pandemic have driven diesel prices in the United States higher to the point of reaching a record-high premium over gasoline and crude oil. Going forward, the supply of diesel in the U.S. and globally is set to tighten even further with the EU embargoes on imports of Russian crude and products, starting in December and February, respectively. “The competition for non-Russian diesel barrels will be fierce, with EU countries having to bid cargoes from the US, Middle East and India away from their traditional buyers,” International Energy Agency (IEA) said in its monthly report earlier this week. “Increased refinery capacity will eventually help ease diesel tensions. However, until then, if prices go too high, further demand destruction may be inevitable for the market imbalances to clear,” said the agency, which sees stubbornly high diesel prices fueling inflation as well as slowing economies leading to a slight decline in global diesel demand in 2023.