November WTI crude oil (CLX23) this morning is down -0.87 (-0.99%), and Nov RBOB gasoline (RBX23) is down -0.45 (-0.20%).
Nov WTI crude oil and gasoline prices this morning are moderately lower. Crude prices are moderately lower today as diplomatic efforts to contain the Israeli-Hamas war have eased concerns the conflict will widen and threaten Middle Eastern crude supplies. Crude prices are also retreating on reports the U.S. will ease sanctions against Venezuela in exchange for its government to improve electoral conditions. A weaker dollar today is limiting losses in crude prices.
Comments today from Iranian Foreign Minister Hossein Amirabdollahian were bullish for crude prices when he said, "Time for political solutions is running out, and the possible expansion of the war to other fronts is approaching the inevitable stage." Iran’s foreign minister has said that Hezbollah militants could open a new front in the Israeli war if the blockade of Gaza and attacks on civilians continue.
A bearish factor for crude oil is today's report in the Washington Post that said the U.S. will ease sanctions on Venezuela's oil exports in exchange for steps to ensure the country holds fair presidential elections next year. An easing of sanctions could put additional crude supplies on the global market.
Strength in the crude crack spread is supporting crude oil prices after the crack spread today climbed to a 1-1/2 week high. The stronger crack spread encourages refiners to increase their crude purchases and refine the crude into gasoline and distillates.
The tightness in the oil market is expected to continue due to the extension of OPEC+ production cuts. Saudi Arabia recently said it would maintain its unilateral crude production cut of 1.0 million bpd through December. The move will hold Saudi Arabia's crude output at about 9 million bpd, the lowest level in three years. Russia also recently announced that it would maintain its 300,000 bpd cut in crude production through December. Saudi Arabia and Russia on Wednesday announced that they will retain their crude production cuts until the end of the year. OPEC Sep crude production was little changed, rising +50,000 bpd to 27.97 million bpd.
A decline in crude in floating storage is bullish for prices. Today'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 -0.5% w/w to 74.71 million bbl as of Oct 13, the lowest in 10 months.
Last Thursday's EIA report showed that (1) U.S. crude oil inventories as of Oct 6 were -3.1% below the seasonal 5-year average, (2) gasoline inventories were +0.2% above the seasonal 5-year average, and (3) distillate inventories were -12.5% below the 5-year seasonal average. U.S. crude oil production in the week ended Oct 6 rose +2.3% w/w to a record high of 13.2 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended Oct 13 rose by +4 to 501 rigs, recovering slightly from the prior week's 20-month low of 497 rigs. That is well below the 3-1/4 year high of 627 rigs posted on Dec 2, 2022. Still, U.S. active oil rigs have roughly tripled from the 18-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity from pandemic lows.
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.
