According to the National Food and Strategic Reserves Administration, on October 31, China released reserves of gasoline and diesel to boost market supply and ensure price stability of regions within the country. On November 1, the oil prices fell after China released the reserves due to the recent supply and demand situation in the domestic oil product market, as per the administration’s statement.
The release led to both Brent and US West Texas Intermediate (WTI) crude futures dropping after experiencing an increase on October 29. Brent crude futures fell by 0.2 percent to $83.52 a barrel after gaining 6 cents, and WTI fell by 0.4 percent to $83.20 a barrel.
”Investors are adjusting positions after the news of China’s release of fuel reserves and ahead of the OPEC+ meeting,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
China’s largest oil refiner, Sinopec Corporation (600028.SS), has made plans “to fully utilise domestic refining capacity in November and boost diesel supply by 29% from a year earlier to ensure filling stations do not run out of stock”, a spokesman said earlier this week. The slight drop in both benchmarks (Brent and WTI) last week is the first weekly drop in eight weeks for Brent and the first decline in ten weeks for WTI.
The Organisation of the Petroleum Exporting Countries, Russia and their allies (OPEC+) are scheduled to meet on November 4. With much anticipation around this event, analysts expect them to continue with the plan to add 400,000 barrels per day of supply in December. The plan by OPEC+ to maintain supply increase rather than focusing on global supply concerns led to oil prices increasing to multi-year highs last week. ”Still, some investors want to square their positions as there is a chance that OPEC+ will decide a bigger increase in output,” said Kikukawa, adding that investors will resume buying after confirming OPEC’s decision.
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On October 29, the US Commodity Futures Trading Commission (CFTC) said that money managers have cut their net long US crude futures and options positions in the week to October 26. US President Joe Biden has requested the G20 energy producing countries with spare capacity to boost production to facilitate global economic recovery. This request is a part of a larger effort to pressure OPEC and its partners to increase the oil supply. However, on October 30 Iraq’s state oil marketing company, SOMO, decided against the decision to increase its production beyond what has already been planned for OPEC countries. According to Baker Hughes Co, on October 29, US energy firms further added oil and natural gas rigs for the 15th month in a row due to the rising oil prices, taking them to the highest since April 2020.
