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Oil Prices Drop as U.S. Crude Oil Inventories See Major Build

Crude Oil Inventories

Crude oil inventories in the United States rose by a staggering 11.9 million barrels for week ending November 3, according to The American Petroleum Institute (API), after a 1.347-million-barrel rise in crude inventories in the week prior, API data showed.

API data now shows a net build in crude oil inventories in the United States of 10.568 million barrels so far this year.

On Monday, the Department of Energy (DoE) reported that crude oil inventories in the Strategic Petroleum Reserve (SPR) stayed the same for the fifth week in a row, with the SPR inventory still sitting at a near 40-year low of 351.3 million barrels, with total purchases for the SPR coming in at less than 4 million barrels since the Biden Administration began its buyback program. Earlier this week, the DoE announced a supplemental solicitation for another 3 million barrels of oil for delivery in January 2024.

Russian ESPO Crude Oil Is Now Trading at A Discount to Brent

Russia’s ESPO crude blend has slipped to a discount to Brent for December loadings to China amid lower Chinese demand and higher freight costs, Reuters reported on Wednesday, citing market sources.

ESPO, named after the East-Siberia-Pacific Ocean pipeline that carries it to export markets, is a light crude with a low sulfur content that independent Chinese refiners are especially partial to.

In recent days, demand for ESPO from China has dropped as refining margins have declined and Chinese refiners are left with limited quotas to export fuels until the end of this year, according to Reuters’ sources.

Two months ago, a shortage of diesel fuel pushed Russia’s ESPO blend to a premium over Brent crude. The shortage prompted a scramble to secure feedstock for the production of the middle distillate which led to ESPO rising to a premium of $0.50 per barrel to Brent crude.

Just weeks ago, ESPO loading from Kozmino to China in November traded at a premium of around $1 a barrel to the Brent benchmark.

Now ESPO has slipped to a discount to Brent and cargoes loading from the Kozmino port in Russia’s Far East in December are trading at a discount of up to $1 per barrel to ICE Brent on a delivered ex-ship basis, Reuters’ sources said.

The lower ESPO export price is also the result of surging freight rates for shipping Russian crude after the United States sanctioned last month two tanker owners for carrying Russian oil sold for over the price cap of $60 per barrel. This was the first time the U.S. has imposed sanctions for a breach of the price cap that the G7 and the European Union agreed to impose on Russia last year.

Bitumen Prices

The drop in the crude oil prices affected on bitumen, in which bitumen price decreased in Europe, and in Spain dropped to $431.

In the Middle East, bitumen price in Bahrain remained at $400, and Singapore dropped to $505.

Prepared by Rumays specialists group.

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Oil Prices Drop as U.S. Crude Oil Inventories See Major Build