Nov WTI crude oil (CLX24) Wednesday closed down -0.33 (-0.45%), and Nov RBOB gasoline (RBX24) closed down -0.17 (-0.08%).
Crude oil and gasoline prices on Wednesday settled moderately lower. Wednesday's rally in the dollar index (DXY00) to a 1-3/4 month high was bearish for energy prices. Also, Wednesday's larger-than-expected build-in weekly EIA crude inventories undercut oil prices. Losses in crude oil were limited due to concerns about the escalation of Middle Eastern hostilities that could disrupt Middle Eastern crude supplies.
A bearish factor for crude oil is ramped-up crude output in Libya after the resolution of a political standoff that had curbed the country's crude production and exports. Libya's National Oil Corp said Tuesday that Libya's crude production rose to 1.13 million bpd, the most in two months, which boosts global crude supplies.
Crude prices are underpinned by the possibility that Israel might retaliate against Iran for its missile attack on Israel by bombing Iran's oil facilities. Goldman Sachs said Sunday that Brent crude could surge to $90 a bbl if crude exports from Iran are disrupted. Also, JPMorgan Chase said that given the low level of global oil inventories, the odds favor a sustained geopolitical premium in crude prices until the conflict between Israel and Iran is resolved.
A decline in crude oil held worldwide on tankers is bullish for prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -28% w/w to 49.11 million bbl in the week ended October 7, the lowest in 4-3/4 years.
Crude prices found support after OPEC+ on September 5 agreed to pause its scheduled crude production hike of 180,000 bpd in October and November due to recent weakness in crude prices and signs of fragile global energy demand. However, the Financial Times reported on September 26 that Saudi Arabia is ready to abandon its unofficial oil price target of $100 a barrel to regain its market share and is committed to returning its crude production as planned on December 1.
A decline in Russian crude exports is supportive of crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -370,000 bpd to 3.37 million bpd in the week to October 6. Also, Russia's Energy Ministry reported last Wednesday 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+.
Wednesday's weekly EIA report was mixed for crude and products. On the bearish side, EIA crude inventories rose +5.81 million bbl, a larger build than expectations of +1.6 million bbl. Also, crude supplies at Cushing, the delivery point of WTI futures, rose +1.2 million bbl. On the positive side, EIA gasoline stockpiled fell -6.3 million bbl to a 13-month low, a larger draw than expectations of -1.0 million bbl due to a +13.3% w/w jump in US gasoline demand to 9.654 million bpd, the highest in 2-3/4 year. Also, EIA distillate inventories fell -3.12 million bbl, a larger draw than expectations of -1.75 million bbl.
Wednesday's EIA report showed that (1) US crude oil inventories as of October 4 were -4.0% below the seasonal 5-year average, (2) gasoline inventories were -3.7% below the seasonal 5-year average, and (3) distillate inventories were -9.0% below the 5-year seasonal average. US crude oil production in the week ending October 4 rose +0.8% w/w to 13.4 million bpd, tying the record high from the week of August 16.
Baker Hughes reported last Friday that active US oil rigs in the week ending October 4 fell by -5 rigs to 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.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
