Financial markets are getting a boost this morning thanks to a capital injection of roughly $18.6 billion from China’s central bank. We reported yesterday that Evergrande, the Chinese real estate giant, is having trouble making their debt payments; for now, it appears they’ll be able to continue operating. As investors breathe a big sigh of relief, prices are taking flight. Oil is up more than $1/bbl, and fuel prices are gaining roughly 3 cents.
Providing further market support, OPEC+ reportedly produced even less than their production quotas allow, achieving 116% compliance with their production cuts. The oil cartel agreed to increase output each month until the end of 2021, but it seems that a year and a half of limited supply has left them ill-prepared to hike output so quickly. The outage stems largely from production outages in Nigeria and Angola, though Russia (a member of OPEC+) also had an unexplained drop in their oil flows. With demand remaining strong, continued OPEC+ restraint has weighed on markets and kept prices elevated.
Finally, the API reported bullish data yesterday, providing tailwinds to rising fuel prices. This week, the organization is calling for a 6 million barrel draw, more than double the expected draw. They also reported a strong 2.7 million barrel draw for diesel stocks and a meager gasoline dip as well. With all the storm activity, traders have been following inventory movements closely to see how America’s fundamental supply position has changed – and how that positions inventories heading into the winter.