CRUDE OIL

• Crude oil inventories decreased by 1.3 MMBbl last week as reported by the EIA. The gasoline and distillate inventories increased 2.3 MMBbl and 0.3 MMBbl respectively. The unexpected crude oil withdrawal was due to lower imports (down 845 MBbl/d) and slightly higher refinery runs (up 271 MBbl/d). The most important number to keep an eye on, total petroleum inventories, posted an insignificant decline of 0.1 MMBbl. The report was neutral, as the bullish decline in crude oil stocks was offset by the bearish, higher than expected, growth in gasoline inventories. Reporting early due to the Thanksgiving holiday this week, Baker Hughes reported on Wednesday that five rigs had been added in the US, extending the rig count gains.

• The markets chose to focus on OPEC related news and largely ignore any other fundamental news this week:
1. The market began the week optimistic about the prospects of an OPEC cut. The cartel was believed to be close to agreeing on the details of a cut of 4-4.5% from current output levels. Libya and Nigeria were going to be kept exempt and Iran was going to be allowed to cap production at current levels.
2. The market started giving back the gains on Tuesday as the prospects of Iran and Iraq agreeing to cap or cut production was placed under scrutiny. Iran is still targeting higher production levels (4-4.2 MMBbl/d) since the sanctions have been lifted and Iraq has made it clear that they want to remain exempt, as they need the revenue to fight ISIS.
3. Prices were down 4% on thin trade Friday, as Saudi Arabia pulled out of a Monday meeting with Russia regarding non-OPEC involvement in the cut. Saudi Arabia believes that OPEC members should reach a consensus regarding the cut before meeting with non-OPEC members. Russia was largely expected to propose to cap its production at current levels. The announcement once more highlighted that the cut (or the mere credibility of its enforcement) is still uncertain.
4. News also emerged that Saudi Arabia is planning to increase exports to Asia in January. The news comes fresh on the heels of data showing Russia has overtaken Saudi Arabia as the top exporter to China in October. It is unclear how Saudi Arabia would increase exports to Asia while also bearing the brunt of the production cut.

• Crude oil prices are going to be dictated by OPEC this week. The market still expects OPEC to announce a cut after the meetin...