Oil market: Arabia is gaining traction, the USA - inventories

Oil continues to be under pressure and it is well-founded. The last day of October ended for the oil bulls on a minor note, as, indeed, the entire month. By the way, the outcome of October was the worst one since July 2016. We’ve already announced causes: oil producents are gaining the production when the demand can’t keep up, and overall expectations in markets are depressed.

Bearing in mind that the general fundamental background is conducive to sales, any news which confirms its feasibility, just make the situation worse.

Here are some examples of such news:

1. Oil inventories in the US are growing. In yesterday's review we’ve noted that according to the API, oil reserves in the United States are increasing for the second month in a row. Yesterday's official data confirm this information. This is the sixth week of growth in a row. Such a protracted series of growth stocks in the US have not seen since March 2017. And it hurts oil buyers.

2. Saudi Arabia has brought oil production to 10.7 million b/d, which is close to historical highs. And it appeared, Arabia does not plan to stop there. The point is that Saudi Arabia freights more and more tankers. According to Charles R. Weber, the number of tanker shipments in October increased by 12% to a record 157 vessels, while the results of November may be even more impressive - the loading plan for the first 10 days of the month suggests an increase of 10% relative to October levels. The fact confirming this information is the sharp hike in the cost of freight for supertankers. If a month ago the cost was $18,000 per day, then in just a few weeks it has tripled (!) And now stands at $51,000 (the maximum level since 2017).

And finally, let’s note yesterday's data on oil production in the US: in one week it has grown at 300K b/d (!). The USA is producing 11.2 billion b/d so far. The best confirmation of our previous argument will be even difficult to find.

As we can see, there are direct and indirect drivers pointed that the situation on the oil market has changed and changed radically, which means that oil needs to be sold. Actually, we started to voice this long-term idea back in September.