December WTI crude oil (CLZ24) Friday closed down -1.98 (-2.74%), and December RBOB gasoline (RBZ24) closed down -0.0411 (-2.00%).
Crude oil and gasoline prices Friday were under pressure after Chinese stimulus measures were seen as underwhelming, which may keep Chinese economic growth and energy demand subdued. Also, Friday's dollar strength weighed on energy prices. In addition, crude oil prices are being undercut by speculation that President-elect Trump's policies will increase US crude production and that new tariffs may slow China's economy.
Friday's Chinese stimulus announcement fell short of hopes for more measures to stimulate consumer demand in China and revive its slumping housing market. The Chinese government announced a 10-trillion yuan ($1.4 trillion) multi-year program to refinance local debt, disappointing analysts looking for more steps to contend with China's slowing economy.
Friday's stronger-than-expected global economic news supported energy demand and crude prices. The University of Michigan US Nov consumer sentiment index rose +2.5 to a 7-month high of 73.0, stronger than expectations of 71.0. Also, the Japan Sep leading index CI rose +2.5 to a 4-month high of 109.4, stronger than expectations of 109.0.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.
Crude has support from Sunday's news that OPEC+ will delay its 180,000 bpd crude production increase by a month, the second straight month that the supply increase has been postponed. OPEC's Oct crude production rose +370,000 bpd to 26.9 million bpd.
Bellicose comments from Iran on Monday were bullish for crude when Iranian supreme leader Ayatollah Ali Khamenei warned of a "crushing response" to Israel's recent air strikes on Iran. Also, a report by the Wall Street Journal Sunday said that Iran is planning a counterattack on Israel involving more powerful warheads and other weapons. 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 -8.2% w/w to 51.44 million bbl in the week ended November 1.
A decline in Russian crude exports is bullish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -530,000 bpd to 3.02 million bpd in the week to November 3, a 6-week low. 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+.
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 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.
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.
