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Peace deal or not?
War premium lingers on uncertain odds for the success of peace talks
Steve Sutherlin for Petroleum News
Alaska North Slope crude shed 80 cents Dec. 2, to close at $63.50 per barrel. WTI shed 68 cents to close at $58.64. Brent shed 72 cents to close at $62.45. Crude trading was choppy on a key day for peace negotiations aimed at the conflict between Russia and Ukraine.
Crude oil futures turned slightly higher the following day on skepticism that Russia and Ukraine would reach a peace deal. The WTI close Dec. 3 was $58.95, and Brent was $62.67.
(See chart in the online issue PDF)
A five-hour Kremlin meeting between Russia President Vladimir Putin and U.S. envoys Steve Witkoff and Jared Kushner wrapped up without an agreement to end the war, according to a MarketWatch report. Territorial claims were a reported sticking point.
WSJ Dec. 4: President Trump's remarks on potential military action against drug-trafficking nations and a firmer stance toward Venezuela have fueled geopolitical risk premium priced into oil, said Nadir Belbarka of XMArabia.
Belbarka said in a note, "The administration's proposed rollback of U.S. fuel-economy standards also suggests a longer-term policy shift that could lift domestic fossil-fuel demand, supporting prices."
Crude, gasoline, distillate reserves expand U.S. commercial crude oil inventories for the week ended Nov. 28 increased by 0.6 million barrels from the previous week to 427.5 million barrels -- 3% below the five-year average for this time of year, according to U.S. Energy Information Administration data released Dec. 3.
Total U.S. motor gasoline inventories jumped 4.5 million barrels over the week, reaching 214.4 million barrels -- 2% below the five-year average for the time of year, the EIA said. Distillate fuel inventories rose 2.1 million barrels on the week to 114.3 -- 7% below the five-year average for the season.
ANS rose 11 cents Dec. 1 to close at $64.30, as WTI gained 77 cents to close at $59.32, and Brent slid three cents to close at $63.17.
ANS outpaced WTI and Brent Nov. 28, jumping 62 cents to close at $64.19, as WTI fell 10 cents to close at $58.55, and Brent edged seven cents higher to close at $63.20.
Nov. 27 was the Thanksgiving holiday in the United States.
On Nov. 26, ANS gained 54 cents to close at $63.57, as WTI gained 70 cents to close at $58.65, and Brent gained 65 cents to close at $63.13.
ANS plunged 86 cents to close at $63.03 Nov. 25, while WTI and Brent each plunged 89 cents to close at $57.95 and $62.48 respectively.
WoodMac sees oversupply leading to underinvestment Wood Mackenzie's short-term oil market narrative into 2016 said too much supply will lead to consequently weak prices, and to the inevitable response of corporates to cut costs and investment, Simon Flowers, WoodMac chairman, chief analyst, and author of The Edge said, writing in The Edge Dec. 3.
Flowers said the outlook for oil demand beyond -- certainly into the next decade -- looks more robust than it has for some time, with positive implications for the entire value chain.
He asked Douglas Thyne, oil supply research director, and Alan Gelder, SVP for refining, chemicals & oil markets, "Why does the outlook for oil demand look firmer today?"
The pair said two factors suggest that demand will be more resilient than many had expected in the aftermath of the Paris Agreement a decade ago.
"First, the war in Ukraine forced a readjustment of energy policy around the energy trilemma," they said. "Many governments have skewed policy towards energy security and affordability over sustainability, strengthening hydrocarbons' hold on the energy market." "Second -- a symptom of the slow pace of the unfolding energy transition -- is the modest penetration rate of electric vehicles and e-trucks in most countries, except China," they said. "That's supporting demand for gasoline and diesel, which together constitute over half of global oil consumption."
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