The Commodities Feed: Risk-off move weighs on the market

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The oil market came under pressure yesterday, unable to escape the broader risk-off move across markets. Although ICE Brent settled 0.69% lower on the day, oil performed relatively well compared to other assets. Downward pressure continued in early morning trading today, following a bearish inventory report from the American Petroleum Institute (API).

API’s numbers show that US crude oil inventories increased by 6.5m barrels over the last week, while crude stocks in Cushing grew by 400k barrels. Changes in refined product inventories were more supportive, with gasoline and distillate stocks falling by 5.7m barrels and 2.5m barrels, respectively. While bearish for crude, the release is supportive for refined product cracks.

Reports that Ukraine claimed to have struck Lukoil’s Norsi refinery in Russia offered further support to the refined products market, particularly middle distillates. Norsi has a capacity of around 340k b/d. The combination of both recent sanctions and continued Ukrainian drone attacks on Russian refinery infrastructure is providing upside to the middle distillate market, with the ICE gasoil crack trading around US$30/bbl.

European natural gas prices continued to show strength yesterday, with the Title Transfer Facility (TTF) settling 2.55% higher. EU gas storage remains stable at around 83%, below the 5-year average of 92%. Prospects for lower wind generation and colder-than-usual weather in December provided a boost to the market. The EU gas balance remains vulnerable this winter, although it’s clearly something that the market is not overly concerned about. This is evident from the lack of interest from speculators in the European gas market.