August WTI crude oil (CLQ24) today is down -0.17 (-0.21%), and Aug RBOB gasoline (RBQ24) is down -0.43 (-0.17%).
Crude oil and gasoline prices today gave up an early advance and turned lower. A stronger dollar today is negative for energy prices. Crude prices turned lower after stocks erased an early rally and retreated, which undercuts confidence in the economic outlook and energy demand. Crude prices today initially moved higher as wildfires in Canada threatened to cut 400,000 bpd of oil production. Crude also has carryover support from Wednesday when the EIA reported crude inventories fell more than expected to a 5-month low.
Comments today from ECB President Lagarde were bearish for crude when she said, "The risks to economic growth are tilted to the downside, and a weaker world economy or an escalation in trade tensions between major economies would weigh on Eurozone growth."
Crude has support from wildfires in Canada that threaten to curb 400,000 bpd of Canadian crude production, putting piped crude shipments to the US at risk. Hot weather in Alberta has sparked 50 out-of-control blazes and has reduced Canada's crude production.
Today's global economic news was mixed for energy demand and crude prices. On the negative side, US weekly continuing claims rose +20,000 to a 2-1/2 year high of 1.867 million, showing a weaker labor market than expectations of 1.856 million. Also, Eurozone May construction output fell -0.9% m/m, the third straight monthly decline and the biggest drop in 14 months. On the positive side, the US July Philadelphia Fed business outlook survey rose +12.6 to 13.9, stronger than expectations of 2.9.
Weakness in the crude crack spread is bearish for crude prices. Today's crack spread fell to a 6-1/2 month low, discouraging refiners from purchasing crude oil and refining it into gasoline and distillates.
In a bearish factor, Russia's crude exports in the week to July 14 rose by +200,000 bpd to 2.97 million bpd, according to vessel-tracking data compiled by Bloomberg. Also, higher-than-expected Russian crude output is bearish for oil prices. Russian crude production averaged 9.078 million bpd in June, above its agreed target of 9.049 million bpd.
Crude oil prices have underlying support from the Hamas-Israel conflict. Israel's military continues to conduct operations in Gaza, and there is the continued risk that the war might spread to Hezbollah in Lebanon or even to a direct conflict with Iran. Meanwhile, ongoing attacks on commercial shipping in the Red Sea by Iran-backed Houthi rebels have forced shippers to divert shipments around the southern tip of Africa instead of going through the Red Sea, disrupting global crude oil supplies.
A decline in crude oil in floating storage is bullish for prices. Monday's weekly data from Vortexa showed that the amount of crude oil held worldwide on tankers that have been stationary for at least a week fell -20% w/w to 74.53 million bbl as of July 12.
OPEC+ rolled out a plan to restore some crude production in Q4, which sparked worries about a glut in global oil supplies. On June 2, OPEC+ extended the 2 million bpd of voluntary crude production cuts into Q3 but said they would gradually phase out the cuts over the following 12 months, beginning in October. OPEC pledged to extend its crude production cap at about 39 million bpd to the end of 2025. Also, the UAE was given a 300,000 bpd boost to its production target for 2025.
A decrease in OPEC crude output is positive for oil prices. OPEC's June crude production fell -80,000 bpd to 26.98 million bpd.
Wednesday's EIA report showed that (1) US crude oil inventories as of July 12 were -4.7% below the seasonal 5-year average, (2) gasoline inventories were +0.03% above the seasonal 5-year average, and (3) distillate inventories were -6.7% below the 5-year seasonal average. US crude oil production in the week ending July 12 was unchanged w/w and matched a record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending July 12 fell -1 rig to a 2-1/2 year low of 478 rigs. 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.
