May WTI crude oil (CLK23) on Thursday closed down -0.94 (-1.33%), and May RBOB gasoline (RBJ23) closed up +1.27 (+0.49%).
Crude oil and gasoline prices Thursday fell back from 1-week highs and settled mixed. A recovery in the dollar Thursday sparked long liquidation in crude futures after the dollar index rebounded from a 6-week low and moved higher. Losses in crude oil accelerated Thursday afternoon when U.S. Energy Secretary Granholm said it would be "difficult" this year to refill the Strategic Petroleum Reserve (SPR), citing ongoing sales from the SPR and said that it would take "a few years" to refill the reserve.
Crude prices Thursday initially climbed to a 1-week high after the dollar index fell to a 6-week low and as stocks staged an early rally, which shows confidence in the economic outlook and is bullish for energy demand and crude prices.
China's economic recovery from the pandemic has been slow to materialize and is negative for energy demand and crude prices. China car sales from Jan-Feb are down -9.4% y/y, and international flights from China were only 22% of pre-pandemic levels as of March 16.
Rising crude demand in India is bullish for oil prices. On Wednesday, India's oil ministry reported that India Feb crude oil imports rose +8.5% y/y to 19.1 MMT, the most in seven months.
In a bearish factor, Vortexa Monday reported that the amount of crude stored on tankers that have been stationary for at least a week rose +2.6% w/w to 82.71 million bbl in the week ended March 17.
Goldman Sachs Monday cut its 12-month crude price forecast for Brent crude to $94 a barrel from a previous forecast of $100 a barrel, citing "banking stress, recession fears, and an exodus of investor flows." Goldman now predicts that OPEC+ will start to reverse its supply cuts, currently at about 2 million bpd, in Q3 of 2024 versus a prior forecast of the second half of 2023.
A bearish factor for crude was last Wednesday's monthly report from the International Energy Agency (IEA) that said global crude supplies would "comfortably" exceed demand in the first half of this year. The IEA reported that global oil inventories surged by 52.9 million bbl in Jan to 7.8 billion bbl, the highest in 1-1/2 years.
On February 1, the OPEC+ Joint Ministerial Monitoring Committee recommended keeping crude production levels steady as the oil market awaits clarity on demand in China and crude supplies from Russia. OPEC crude production in February rose by +120,000 bpd to 29.24 million bpd.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of March 17 were +7.6% above the seasonal 5-year average, (2) gasoline inventories were -4.0% below the seasonal 5-year average, and (3) distillate inventories were -8.8% below the 5-year seasonal average. U.S. crude oil production in the week ended March 17 rose +0.8% w/w to 12.3 million bpd, matching a 2-3/4 year high and only 0.8 million bpd (-6.1%) below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended March 17 fell by -1 rig to a 9-month low of 589 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2. U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
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.
