DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange fell 3% or more on Monday. The losses came on a stronger U.S. dollar index and reports suggesting Russian crude oil exports are holding steady ahead of a European embargo on seaborne oil shipments from Russian ports, with Asian buyers lifting increased volumes of displaced Russian oil.

Russian crude oil exports rose to 3.25 million barrels per day (bpd) for the first two weeks of November, which is roughly the same rate Russia exported in the weeks prior to President Vladimir Putin's invasion of Ukraine on Feb. 24. Two-thirds of the crude loaded at Russian ports are now heading to Asian markets, according to private data published this morning, with India and China emerging as top buyers of Russian oil followed by Turkey and the United Arab Emirates. In comparison, Russia's seaborne oil exports to European countries dropped to just 700,000 bpd in the four-week period ending Friday, Nov. 11.

Additionally, crude loadings out of Russian ports that are yet to show their destination rose to a record 2.39 million bpd on a four-week average basis. This might suggest the so called "shadow trade" in Russian crude tankers is gaining traction ahead of a European embargo on Russian oil flow that is set to take effect Dec. 5.

Earlier this month, reports emerged suggesting G7 countries reached an agreement to enforce a fixed price on Russian oil exports but only at the point of first sale on land, meaning the resale of the same oil at sea won't be subject to the regulation. The measure will also bar European tankers from hauling Russian crude and prohibit the provision of insurance, brokerage and other maritime services unless oil loaded to those vessels was purchased at a price below a yet-to-be-agreed-upon cap.

So far this year, Russian crude production held steady at 10.86 million bpd, according to OPEC's Monthly Oil Market Report released this morning, which is 0.5% higher compared to 2021 levels. Further details of the report showed Saudi Arabia's oil production slid 149,000 bpd last month to 10.838 million bpd, the kingdom's lowest output rate since July, and below its 11.004 million bpd production quota agreed to on Sept. 5. OPEC's oil production dropped by 210,000 bpd to a three-month low 29.494 million bpd.

OPEC downgraded worldwide oil consumption by 100,000 bpd this year for annual growth of 2.5 million bpd. Oil demand in countries that are part of the Organization for Economic Cooperation and Development is estimated to increase by around 1.3 million bpd, while non-OECD oil demand is seen growing by about 1.3 million bpd. Global oil demand in the third and fourth quarters was revised lower due to China's zero-COVID policy along with geopolitical uncertainties in Europe.

For 2023, global oil demand growth forecast was also revised down by 100,000 bpd from the previous assessment to now stand at 2.2 million bpd. OECD oil demand growth is expected to grow by 300,000 bpd and the non-OECD by 1.9 million bpd.

Oil demand growth is anticipated to be challenged by uncertainties related to economic performance in OECD countries, COVID-19 containment measures in China and geopolitical developments.

In outside markets, U.S. dollar index extended gains into afternoon trading Monday, strengthening 3.5% against a basket of foreign currencies to settle at 106.531, further pressuring front-month WTI. NYMEX WTI for December delivery declined $3.09 per barrel (bbl) to $85.87 per bbl, and international crude benchmark ICE Brent fell to $93.14 bbl, down $2.85 on the session. NYMEX December RBOB futures declined 8.11 cents to $2.5285 per gallon, and December ULSD futures retreated 1.13 cents to $3.5440 per gallon.

Liubov Georges can be reached at Liubov.Georges@dtn.com