Oil Firms as Black Sea Storm Disrupts Kazakh Oil Exports

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange powered higher early Wednesday amid a one-two punch of an unplanned supply disruption at the Novorossiysk oil port in the Black Sea region where a hurricane halted about 2 million bpd in Russian and Kazakh oil exports, while an unexpected drawdown from U.S. commercial crude oil inventories lent further support to the West Texas Intermediate contract.

The American Petroleum Institute late Tuesday reported commercial oil supplies in the United States fell last week for the first time since mid-October, drawing down 817,000 bbl compared to expectations for a 900,000 bbl increase. Supply at the Cushing, Oklahoma tank farm, the New York Mercantile Exchange delivery point for WTI futures, declined by 465,000 bbl.

Further details of the report showed gasoline inventories declined 898,000 bbl in the reviewed week versus an expected 100,000 bbl uptick, while distillate supplies rose 2.8 million bbl compared with calls for a draw of 800,000 bbl.

Next, oil traders are waiting for the release of the official inventory report from the U.S. Energy Information Administration, scheduled for 10.30 AM ET.

Also on Wednesday, investors continued to monitor the developing situation ina the Black Sea region where a severe storm halted operations at the key oil hub in Novorossiysk port, disrupting about 2 million bpd in oil exports. Oil loadings from Novorossiysk and the adjoined Caspian Pipeline Consortium (CPC) terminal have been suspended since last week. CPC is a main export route for Kazakhstan's crude oil. According to Kazakh officials, the country's largest oil fields -- Tengiz, Kashagan and Karachaganak -- have reduced oil production by 56% since November 27.

Unexpected supply disruption in the Black Sea region comes ahead of a highly anticipated meeting among OPEC+ oil ministers that has been delayed to Thursday, Nov. 30th. Despite reports of a spat between Saudi Arabia and African producers regarding production levels, market consensus seems to favor the rollover of ongoing OPEC+ cuts into early next year. Saudi Arabia has been voluntarily reducing its oil output by 1 million bpd since mid-summer, depressing production capacities to a decade-low 9 million bpd. Russia, meanwhile, has been reducing its oil exports by 300,000 bpd since the May-June baseline, although oil loadings have seen a marked volatility in recent months. Should Saudi-Russian cuts simply be extended and not deepen, that would not reverse buildup in global oil inventories projected for the first quarter, according to the market sources.

Near 7.30 AM ET, January WTI futures advanced $1.37 bbl to $77.77 bbl, with the prompt spread ending in a $0.10 bbl contango. Brent for January delivery rallied $1.26 bbl to $82.94 bbl, and next-month February delivery trading with $0.25 discount to prompt delivery ahead of the January contract's expiration Thursday afternoon.

NYMEX December ULSD futures gained $0.0057 to $2.9127 gallon, with the December RBOB contract advancing $0.0299 to $2.2599 gallon.

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

Liubov Georges