Since last Friday’s close at USD 72.9 per barrel, Brent crude prices have seen an overall increase throughout the week, sustaining the upward momentum established in late October. However, trading yesterday was marked by significant volatility, including a sharp sell-off during the early morning and afternoon (CEST).

Global financial markets reacted predictably to Donald Trump’s victory, with US rates rising, the USD strengthening, and equities rallying (S&P 500 +2.5%, Dow Jones +3.6%, and Nasdaq +3.0%). In contrast, European equities fell (Euro Stoxx 50 -1.4% and OMX -0.9%), and rates were pushed lower.

The steep appreciation of the USD was a primary driver behind the substantial crude sell-off yesterday. Additionally, the market initially viewed Trump’s victory as potentially negative for global economic growth, with concerns over increased protectionism and reduced global trade, which could weigh on global oil demand.

On the other hand, Trump’s leadership may lead to tougher sanctions on Iran and Venezuela, potentially reducing their production and exports of crude oil to the global market. This could limit the downside risk for oil prices, although it’s unlikely to drive a substantial price increase on its own. Trump’s support for Israel’s defense against Iran could also raise the risk of further regional conflict, which might threaten Iranian crude supplies to a larger degree.

In the longer term, US policies under Trump could encourage further growth in domestic crude production, which reached a record high of 13.4 million barrels per day (mb/d) in August. Data released in late October showed that US crude production rose by 195,000 barrels per day (kb/d) to 13.4 mb/d, while US NGLs increased by 135 kb/d to 7.03 mb/d. When combining US crude, NGLs, biofuels, refinery gains, and adjustments, total US liquid production likely reached 23.13 mb/d in August. With US liquids demand at 20.4 mb/d, this results in a net export of 2.7 mb/d, complicating OPEC+’s plans for production increases.

Yesterday evening, crude prices rebounded significantly from the morning sell-off, reaching the current level of USD 75 per barrel. A minor pullback in the USD supported this recovery, but more importantly, the market is now weighing potential supply risks from the US election outcome and an impending Gulf of Mexico hurricane against increased US inventories and uncertainties around Chinese demand.

China’s oil imports declined again last month, highlighting continued soft demand. Stimulus measures are anticipated soon, with the legislature’s standing committee meeting this week. According to Chinese customs data, crude imports fell about 2% month-over-month to 44.7 million tons in October.

Hurricane Rafael has passed through Cuba and is expected to weaken as it moves toward the US coast. However, Bloomberg reports that approximately 1.55 mb/d of Gulf of Mexico production is now estimated to be impacted, down slightly from 1.6 mb/d. The Bureau of Safety and Environmental Enforcement (BSEE) reported yesterday that 304,418 barrels per day (or 17.4% of oil production) in the US Gulf has already been shut in – thus supporting prices to the upside.

Data from the US DOE yesterday showed a larger-than-expected increase in commercial crude inventories (excl. SPR), which rose by 2.15 million barrels from the previous week to reach 427.7 million barrels (see page 12 attached). Despite this increase, inventories remain about 5% below the five-year average for this time of year.

Total gasoline inventories rose by 0.4 million barrels and are approximately 2% below the five-year average, while distillate (diesel) inventories increased by 2.95 million barrels, remaining 6% below the five-year average.

Although crude inventories rose more than anticipated, signaling a bearish trend, total commercial petroleum inventories (crude and refined products) decreased by 1.1 million barrels last week, indicating that market conditions remain relatively tight in the short term!

Brent crude prices have maintained their upward momentum, rebounding from last week’s low of USD 70.7 per barrel, spurred by relief over limited Israeli retaliation toward Iran, which left energy infrastructure (both oil and nuclear) undamaged. Since that point, as projected, prices have risen by USD 4.6 per barrel in just seven days.

This momentum has been further fueled in the last two days by changes in market fundamentals. Reports confirming OPEC+ plans to delay its previously scheduled oil production increase, originally set for December, have contributed to the continued rise, pushing prices up to the current level of USD 75.2 per barrel.

Late last week, Brent prices were also influenced by Iranian rhetoric, with Iran pledging further retaliation. The latest WSJ report suggests that Iran may be planning a ”strong and complex” response against Israel, likely after the US election. The report also notes that Israel’s October 26 strike inflicted significant damage on Iran’s air defenses, heightening tensions. While the timing of any Iranian response remains speculative, further hostilities between Iran and Israel appear very predictable.

Despite looming geopolitical uncertainty and the potential for a heightened risk premium, the impact of current market fundamentals remains significant. To our surprise, OPEC+ has confirmed it will postpone its planned December production increase of 180,000 barrels per day.

However, this deferral doesn’t remove the target of adding a cumulative 2.2 million barrels by December 2025. OPEC+ will continue to monitor the market, increasing supply as soon as conditions favor it, which will likely keep substantial oil price gains in check over the coming year.

OPEC+ will not to lift production by 180 kb/d in December as planned. Of course an effort to prevent the oil price from sliding lower. US crude oil production is at the same time ticking up by 38 kb/d/month in September and the growth pace looks like it is ticking higher by the month as new US shale oil production is growing faster than losses in existing production. US crude oil reached a new, all-time high of 13.4 mb/d in August. The US is not making it easy for OPEC+. The group is trying to tell the US: ”Slow your growth, because we need to produce more!”. To no wain it looks. Iranian sabre-rattling helps to lift Brent this morning.

Brent crude fell 3.9% last week in a sense of eased Iranian-Israeli tensions. Brent crude traded in a range of USD 70.72 – 76.05/b last week and closed down 3.9% week on week on Friday at USD 73.1/b. The low point last week was driven by relief that the Israeli retaliation towards Iran looked fairly limited with no damage to either oil infrastructure or nuclear installations. Muted rhetoric from Iran Iran to start with also helped to drive the price to its low point last week. Iranian rhetoric with promises of re-retaliation increased through the week and the oil price rose along with that towards the end of the week. What is for sure is that there will be more rocket exchanges between Iran and Israel to come. That barrier is totally broken.

But tensions are rising again as Iranian re-retaliation is in the planning. News this morning (Wall Street Journal) is that Iran is planning a ’Strong and complex’ re-retaliation attack on Israel at some point after the US election. The article also states that the Israeli attack on Iran on 26 October severely damaged parts of Iran’s air defenses. This isn’t over.

OPEC+ holds back planned increase in December to avoid price declines. Brent rises 2% to USD 74.5/b this morning as OPEC+ decides to delay its planned increase of 180 kb/d in December. The planned increase of a total of 2.2 mb/d over a 12 month period has however not been called off. That still hangs over the market as a dark cloud. It tells the market that there is limited upside in the oil price in the year to come. Global demand acceleration in 2025 – OPEC+ will take that. Disruptions in supply in 2025 – OPEC+ will step in and take that. It is only a massive loss of supply involving the Strait of Hormuz which would be out of the hands of OPEC+ to cover.

US crude oil production at new all-time high in August of 13.4 mb/d. Not making it easy for OPEC+. US production reaches new all-time high in August at 13.4 mb/d. Monthly controlled data released in late October showed that US crude oil production increased by 195 kb/d to 13.4 mb/d and a new all-time high in August. US NGLs increase by 135 kb/d to 7.03 mb/d as well. If we add together US crude, NGLs, bio, refinery gains and adjustments, then total US liquids probably came in at 23.13 mb/d in August. With US liquids demand at 20.4 mb/d it leads to a net US liquids export of 2.7 mb/d

US shale oil production growth pace is ticking higher. US shale oil production grew at a marginal, annualized pace of 451 kb/d/month in September. The annualized growth pace was 401 kb/d in August. The pace is picking up. US shale oil producers are not making it easy for OPEC+.

US crude oil production reached a new all-time high in August at 13.4 mb/d. Production of NGLs also increased. US crude + NGLs + bio + refinery gains + adjustments puts US total liquids production at more than 23.1 mb/d in August.

US shale oil production grew at a marginal, annualized pace of 451 kb/d in. The growth pace is picking up as new production grows faster than legacy losses.