US Weekly Oil Summary: Market Facing Gasoline Glut

US refiners are expected to keep producing too much gasoline in the months ahead, causing prices to keep finding downward pressure despite higher oil prices according to OPIS analyst Tom Kloza.

• Three tankers laden with gasoline and headed to New York have been diverted in recent weeks due to poor regional demand, according to Bloomberg. Three cargoes have seen diversions from New York while carrying gasoline, Bloomberg said.
• The weakness in USGC gasoline prices has made the region the cheapest source of gasoline for Nigeria for November delivery, according to Bloomberg citing Sparta commodities.
• US crude production rose from 12.96mbpd in July to a record high of 13.05mbpd in August surpassing the pre-covid levels and up from 11.99mbpd in Aug 2022.
• The US Gulf saw a drop in sour crude imports for a third consecutive month in October, in part because of Autumnal maintenance as well as OPEC+ cuts according to Vortexa.
• Canadian Natural Resources expects Western Canadian Select/WTI diffs to narrow into 2024 because of the Trans Mountain pipeline expansion. It is due to be operational early next year.
• "The line filling process will take 4.5 million barrels out of the market and this is positive for light/heavy differentials as they will tighten," CNR President Tim McKay said.
• However, construction on the Canadian Trans Mountain oil pipeline expansion was ordered to stop Thursday by the Canada Energy Regulator due to environmental and safety non-compliances.
• US total rig count fell by 7 to 618 in the week to Oct. 27, according to Baker Hughes.
• Federal Reserve officials left interest rates on hold at 22-year highs for a second meeting in a row Wednesday, but also did not rule the possibility to additional tightening later this year or next year if inflation proves more stubborn than expected.
• USD: Despite some early greenback strength, the USD index looks set to close the week with a substantial 1.5% decline. A combination of factors provided headwinds; unexpectedly moderate Treasury quarterly refunding projections, weaker-than-expected ISM & NFP data and a moderately dovish tilt to the November FOMC meeting.
• US DATA: Jobless Claims Data Offer Signs of Reduced Labor Churn. Initial claims were a little stronger than expected in the week to Oct 28 as they increased to a seasonally adjusted 217k (cons 210k) after an upward revised 212k (initial 210k).
• US Payrolls undershot expectations with 150k vs cons 180k (even more so for private at 99k vs cons 145k) and with a heavy -101k two-month revision. The revisions were mainly to Sept (-62k) but also heavy in Oct (-39k).
• The unemployment rate surprisingly pushed a tenth higher to 3.88% (cons 3.8) and the U6 two tenths highs to 7.2% for a fresh high since Feb'22.