Oil prices are higher this morning after a two-day decline on the possibility of more attacks in the Middle East and potentially tightening US crude stockpiles.

While one Israeli minister suggested that the war with Hezbollah could be over by year-end, the country’s military chief vowed to strike Iran “very hard” should the OPEC producer launch another attack.

“We think the oil market has relaxed too quickly,” Standard Chartered analysts including Emily Ashford said in a note.

“We see the risk of an escalating series of attacks over an extended period, with no immediate prospect of either military or diplomatic resolution.”

Additionally, all eyes are on OPEC+’s plans to gradually revive production from December, with traders split on whether the alliance will press ahead. Reuters reported that OPEC+ nations could delay plans to revive oil production in December, citing unidentified sources.

But more notable for now is what local demand and supply looks like…

API

Crude -573k

Cushing +320k

Gasoline -282k

Distillates -1.463mm

DOE

Crude -515k

Cushing +681k

Gasoline -2.707mm

Distillates -977k

The opfficial data shows a major decline in gasoline stocks and small draw in crude inventories…

Source: Bloomberg

Total Gasoline stocks fell to their lowest since Nov 2022…

Source: Bloomberg

The addition of 1.189mm barrels to the SPR moved total crude stocks up by 674k barrels last week…

Source: Bloomberg

US crude production remains at record highs 13.5mm b/d…

Source: Bloomberg

WTI is holding above $68 after the data, still well down on the week…

Source: Bloomberg

Finally, we note that pump prices remain mysteriously low (multi-year low in gasoline stocks?) given where crude and wholesales gasoline prices are…

Source: Bloomberg

Bear in mind that prices remain considerably higher than pre-Harris/Biden…

Source: Bloomberg

We are sure this not political at all… one week before the election.