Oil Price Forecast - Oil Prices Recover as U.S. Draw Depletes 3.4M Barrels

Oil Prices Rebound as U.S. Inventory Draw and Russian Sanctions Deadline Drive Market Volatility

Crude oil prices staged a cautious rebound on November 20, with WTI crude at $59.86 (+0.7%) and Brent crude at $63.94 (+0.7%), following a sharp 2% decline the previous day. The bounce came as the U.S. Energy Information Administration (EIA) reported a 3.4 million-barrel draw in crude inventories for the week ending November 14 — nearly six times higher than analysts’ expectations of a 603,000-barrel decrease. The data signaled stronger export demand and elevated refinery throughput despite subdued consumption in gasoline and distillates.

U.S. Inventory Data Signals Tightening Supply in Refined Products

The EIA data confirmed that U.S. crude stockpiles dropped to 424.2 million barrels, marking the largest weekly draw since September. Refineries increased runs in response to robust margins and export demand, particularly toward Latin America and Europe. However, gasoline and distillate inventories rose for the first time in over a month, suggesting that domestic consumption may be softening ahead of the winter demand peak. Gasoline inventories increased by 2.2 million barrels, and distillates added 1.8 million barrels, reflecting weaker trucking and industrial activity relative to earlier in Q4.

Russian Sanctions Deadline and Market Risk Premiums Support Prices

Traders have shifted focus toward the November 21 U.S. sanctions deadline on Rosneft and Lukoil, two of Russia’s largest oil exporters. These measures, combined with the enforcement of Trump’s October 10 executive order targeting Russian energy companies, could remove up to 800,000 barrels per day (bpd) from global supply in the short term. Lukoil has until December 13 to divest its international assets, and refiners in India and China have already reported temporary suspensions of December cargoes.

This looming disruption has introduced a modest risk premium of $2–$3 per barrel into the market, offsetting otherwise bearish fundamentals tied to oversupply and slowing global demand growth.

Refined Product Margins Surge Amid Gasoil Tightness

Gasoil crack spreads — the margin between crude oil and refined diesel — surged above $34 per barrel, the highest in 21 months, as U.S. and European distillate inventories fell to 12-year lows. Refining margins for diesel and jet fuel remain elevated amid tight inventories and export demand. European refiners have seen sustained pressure from record Russian seaborne exports, forcing importers to rely heavily on U.S. and Middle Eastern supplies. The structural shortage of middle distillates is supporting refining profitability, even as headline crude prices remain under $65.

China’s Imports Hit Multi-Month Highs, Partially Offsetting Global Weakness

Chinese crude imports continued to rise in October, according to customs data. The country imported 11.39 million barrels per day, maintaining near-record levels. Purchases from the UAE (3.82 million tons) and Kuwait (2.36 million tons) hit all-time highs, while imports from Russia slipped to 9.11 million tons but still made Moscow China’s top supplier. Chinese refiners took advantage of discounted Middle Eastern and Russian barrels to rebuild strategic reserves, contributing to overall seaborne crude demand.

Meanwhile, refinery throughput reached 14.94 million barrels per day, up 6.4% year-over-year, suggesting that China’s domestic energy demand remains stable despite macroeconomic headwinds. However, Beijing’s stockpiling strategy has kept spot demand restrained in the physical market, capping short-term upside for Brent.

Macro Factors: Strong Dollar and Equities Rally Influence Market Tone

The U.S. dollar index (DXY) held near 100.25, maintaining a six-month high that continues to suppress commodity gains. A strong dollar makes dollar-denominated crude more expensive for non-U.S. buyers, reducing purchasing power and pressuring global demand.

Simultaneously, global equity markets rallied following NVIDIA’s (NASDAQ:NVDA) stronger-than-expected earnings report, which helped stabilize risk sentiment across asset classes. The rebound in equities provided limited support to oil futures, though most traders see this correlation as temporary.

European and U.S. Natural Gas Markets Diverge Sharply

Natural gas prices are diverging between the U.S. and Europe. Henry Hub gas traded at $4.55/MMBtu, nearly double year-to-date levels, driven by LNG export demand and colder U.S. weather patterns. Conversely, European TTF futures dropped to $30.87/MWh, an 18-month low, as storage levels remain above 95.7 bcm — exceeding the EU’s 90% target. This divergence underscores North America’s tighter gas supply amid rising power generation needs, while Europe benefits from mild weather and renewable output stability.

Ukraine Conflict, Russian Infrastructure Strikes, and Energy Security Risks

Ukrainian drone strikes on Russia’s Black Sea terminals, including the Sheskharis oil facility, have intensified geopolitical risk. The terminal handles up to 2.2 million bpd of exports, and operations were briefly suspended. Analysts at Standard Chartered estimate that prolonged disruptions could lift the Brent-WTI spread to $4.50–$5.00 per barrel by late November. However, so far, the attacks have had a limited impact on global prices due to excess inventories and cautious trading ahead of the sanctions implementation.

Technical and Market Outlook

Technically, both WTI and Brent remain in a short-term consolidation phase. WTI’s immediate support sits near $58.40, while resistance stands at $61.10. For Brent, the key support is $62.20, with resistance at $65.00. RSI readings for both benchmarks hover around 45, indicating neutral momentum. A breakout above $65.00 Brent could target $67.80, while failure to hold $58.40 WTI could reintroduce bearish momentum toward $56.90.

The market’s bias remains cautious ahead of the November 21 sanctions enforcement, EIA’s next inventory report, and OPEC+ output guidance for December.

Verdict: Crude Oil — HOLD / RANGE-BOUND BULLISH

Oil markets remain balanced between geopolitical risk premiums and persistent oversupply. The 3.4M-barrel U.S. inventory draw and Rosneft/Lukoil sanctions support prices near $60 WTI / $64 Brent, but the upside remains capped by weak demand and strong dollar conditions. Traders should watch for price confirmation above $65 Brent or below $58 WTI for the next directional cue.

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