Oil prices attempted a rebound on Tuesday, supported by soaring European diesel prices amid ongoing supply disruptions caused by sanctions and drone attacks on Russian oil infrastructure. OPEC Secretary-General Haitham Al Ghais dismissed media reports forecasting a 2026 oil surplus, calling them "misleading." However, market data, including Kpler’s analysis, indicates a growing oversupply, with Q3 showing a surplus of 500,000 barrels per day (bpd).
The API reported a 4.448 million-barrel crude inventory build, alongside rising refined product stocks, adding bearish pressure. Despite diesel cracks hitting yearly highs and supporting oil prices, traders remain cautious due to broader oversupply concerns and geopolitical risks.
**Market Snapshot** - WTI crude rose 1.35% to $60.67/barrel; Brent gained 1.07% to $64.89. - The U.S. 10-year yield held at 112.58; the Dow fell 1.07%.
**Key Developments** 1. **OPEC’s Pushback**: Al Ghais rejected surplus claims, asserting balanced 2026 markets. OPEC revised earlier shortage forecasts, triggering a sell-off. The group expects non-OPEC supply to grow by 1.3 million bpd in 2026, with demand rising by 1.6 million bpd. Analysts, however, anticipate continued OPEC+ output hikes post-brief pause.
2. **Refining Margins Strengthen**: - **U.S.**: Gulf Coast refining margins hit yearly highs as diesel stocks fell 12 million barrels over five weeks. Strong exports to Brazil and holiday travel boosted demand. - **Europe**: Supply fears drove cracks up $7/barrel for diesel and $5 for jet fuel. - **Asia**: Singapore margins peaked on robust diesel demand, though Chinese export quotas tightened supply.
3. **U.S. Sanctions Impact**: The Treasury cited plummeting Russian oil demand post-sanctions, with grades trading at multi-year lows. Indian buyers reportedly paused December Russian crude purchases.
Goldman Sachs cut its 2026 Brent/WTI forecasts to $56/$52, citing a 2 million bpd surplus by mid-2026.
Investors are advised to await clearer signals before positioning, with shorting opportunities likely post-rallies.