On Thursday, October 31, U.S. crude oil prices continued to rise in the Asian trading session, driven by the unexpected decline in U.S. crude oil and gasoline inventories, bolstering market expectations for demand growth. According to EIA data, for the week ending October 25, U.S. commercial crude oil inventories decreased by 515,000 barrels, and gasoline inventories fell to a two-year low, reflecting resilient domestic demand. Contrasting with the inventory decrease was the news from OPEC+ about postponing the production increase plan. According to three informed sources, OPEC+ is considering delaying the December production increase plan by a month or even longer to address concerns about weak current demand and oversupply. Analysts expect that the final OPEC+ decision will be announced at the plenary meeting on December 1. This news boosted oil prices, with Brent crude rising by 2% at one point, and the market was bullish.
In addition, the U.S. economic performance in the third quarter also supported oil prices. According to the latest data, the annual growth rate of the U.S. real GDP in the third quarter was 2.8%, slightly lower than the previous value, but consumer spending reached a growth rate of 3.7%, the highest since the beginning of the year, indicating stable domestic demand. The core PCE price index rose to 2.2%, which is basically in line with the Federal Reserve's target expectations, suggesting that inflation is moderate and controllable, filling investors with confidence in the U.S. economic outlook. Market analysis suggests that strong domestic demand and stable economic data might further propel U.S. crude oil prices upward.
As several macroeconomic data including U.S. non-farm payrolls are about to be released in the remaining time of the week, the market focuses on the impact of these data on the Federal Reserve's interest rate decisions within the year to gauge future dollar trends and their impact on oil prices. During the day, investors should also pay attention to the number of initial jobless claims in the U.S. and the core PCE price index for September to gain more clues about economic vitality. Analysts point out that if non-farm payrolls and PCE meet or exceed expectations, the Federal Reserve might take a cautious stance on rate hikes, and the dollar index might remain strong, potentially limiting further upward space for oil prices.
The production increase decision by OPEC+ and the performance of U.S. data will become the two key influencing factors for the oil market going forward. Overall, the decrease in inventories, the recovery in demand, and the expectation of OPEC+ delaying production increases have fueled a strong rebound in U.S. crude oil, with bullish market sentiment. However, if the global demand recovery slows or macroeconomic data falls short of expectations, oil prices may come under pressure.
