December WTI crude oil (CLZ24) Wednesday closed up +0.31 (+0.46%), and December RBOB gasoline (RBZ24) closed up +0.0008 (+0.04%).
Crude oil and gasoline prices recovered from 2-week lows and settled slightly higher on Wednesday. Short covering emerged in crude Wednesday after Russian President Putin and Saudi Crown Prince Mohammed bin Salman stressed "the importance of continuing close coordination in OPEC+." The comments suggest the group could further delay any planned cuts in crude production if oil prices remain low.
Crude and gasoline on Wednesday initially fell to 2-week lows after the dollar index (DXY00) recovered from early losses and rallied to a 1-year high. Crude prices also slipped on unconfirmed reports that said Iran may hold off on retaliating against Israel, which eases concerns about an escalation of hostilities in the Middle East.
A bearish factor for crude was Wednesday's action by Morgan Stanley to cut its full-year crude demand growth forecast for this year to 800,000 bpd from an earlier forecast of 950,000 bpd. Morgan Stanley also cut its crude price forecast for Q1 of 2025 to $72 bbl from a prior estimate of $77.50 bbl.
Global energy demand concerns are undercutting crude prices after OPEC on Tuesday cut its 2024 global oil consumption forecast to 1.8 million bpd, -107,000 bpd lower than last month's forecast, and the fourth consecutive month the cartel has reduced its crude demand estimates.
Crude demand in China has weakened and is a bearish factor for oil prices. According to Chinese customs data, China Oct crude imports fell -2% m/m and -9% y/y to 44.7 MMT, and crude imports year-to-date are down -3.4% y/y at 457.074 MMT. China is the world's second-largest crude consumer.
Concerns that Middle East hostilities could escalate are bullish for crude when Iranian supreme leader Ayatollah Ali Khamenei warned of a "crushing response" to Israel's recent air strikes on Iran. An escalation of hostilities between Iran and Israel could widen the conflict in the Middle East and disrupt the region's crude supplies.
A decline in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -0.4% w/w to 61.78 million bbl in the week ended November 8.
An increase in Russian crude exports is bearish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +260,000 bpd to 3.42 million bpd in the week to November 10. Separately, Russia's Energy Ministry reported on October 23 that Russia's Sep crude production was 8.97 million bpd, down -13,000 bpd from Aug and just below the 8.98 million bpd output target it agreed to with OPEC+.
The consensus is that Thursday's weekly EIA crude inventories in the week of November 8 rose +1.6 million bbl, and gasoline supplies rose +1.0 million bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of November 1 were -4.6% below the seasonal 5-year average, (2) gasoline inventories were -2.4% below the seasonal 5-year average, and (3) distillate inventories were -5.9% below the 5-year seasonal average. US crude oil production in the week ending November 1 was unchanged w/w at a record 13.5 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending November 8 were unchanged at 479 rigs, just above the 2-1/2 year low of 477 rigs posted in the week ending July 19. The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted in December 2022.
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