January WTI crude oil (CLF24) on Monday closed up +0.09 (+0.13%), and Jan RBOB gasoline (RBF24) closed down -0.0067 (-0.33%).
Crude oil and gasoline prices on Monday settled mixed. Crude prices Monday recovered from early losses and posted modest gains after the AAA predicted a record number of air travelers during Christmas week, a positive for fuel demand. A stronger dollar limited gains in crude. Also, weaker-than-expected price reports from China signaled weakness in the Chinese economy that is negative for energy demand and crude prices.
Crude prices found support Monday after the American Automobile Association (AAA) projected a record 7.5 million people are expected to fly from Dec 23 to Jan 2, the most since the AAA began tracking the data in 2000.
Weaker-than-expected Chinese consumer and producer prices signaled weakness in China's economy, which was bearish for energy demand and crude oil prices. China's Nov CPI fell -0.5% y/y, weaker than expectations of -0.2% y/y and the biggest decline in 3 years. China's Nov PPI fell -3.0% y/y, weaker than expectations of -2.8% y/y.
A positive factor for crude was the U.S. Energy Department's offer last Friday to buy as much as 3 million bbl of sour crude for delivery in March to refill the strategic petroleum reserve. That comes on top of a previous tender to buy the same amount for February. The Energy Department said it will hold monthly tenders to buy oil to refill the reserve through at least May 2024.
Signs of increasing U.S. crude exports are negative for prices as ship-tracking firms Kpler and Vortexa project that U.S. crude exports will soon reach a record 5.7 million bpd.
A bearish factor for crude was last Tuesday's action by Saudi Arabia to cut the price of its flagship Arab light crude to Asian customers for January delivery by 50 cents to $3.50 a barrel more than the benchmark, the first cut in prices since June but below expectations of a -$1.05 a barrel cut in prices.
On Nov 30, OPEC+ agreed to cut crude production by -1.0 million bpd through June 2024. However, crude prices sold off on the news since no details were provided on how the cuts would be distributed among members nor how Russia's -300,000 bpd export cut would factor into the new totals. Delegates said the final details of the new accord, including national production levels, would be announced individually by each country rather than in the customary OPEC+ communique. The market was disappointed that the extra cuts in OPEC crude output will be announced by each individual country, which suggests the reductions may only be voluntary.
Saudi Arabia said on Nov 30 that it would maintain its unilateral crude production cut of 1.0 million bpd through Q1-2024. The move would maintain Saudi Arabia's crude output at about 9 million bpd, the lowest level in three years. Russia also said it will deepen its voluntary oil export cuts by 200,000 bpd to 500,000 bpd in Q1 of 2024. OPEC Nov crude production fell -140,000 bpd to 28.050 million bpd.
The rift between Angola and other OPEC+ members remains and is a bearish factor that signals more infighting among members. Angola OPEC governor Pedro said on Nov 30 that his country rejects OPEC's quota and "Angola will produce above the quota determined by OPEC." Angola is Africa's second-largest crude producer, and OPEC governor Pedro said his country will pump 1.18 million bpd in January, above the 1.11 million quota set out by OPEC.
Oil prices are supported by concern that attacks on oil tankers in the Middle East may disrupt crude oil supplies. The U.S. Central Command said there were four attacks by missiles and drones against three separate commercial vessels on Sunday operating in international waters in the Red Sea. Iranian-backed Houthi rebels claimed responsibility for the attacks after they issued a threat against ships with ties to Israel last month, calling them "legitimate targets."
An increase in crude in floating storage is bearish 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 rose +11% w/w to 79.87 million bbl as of Dec 8.
An increase in Russian crude exports is bearish for oil prices. Tanker-tracking data monitored by Bloomberg shows refined fuel shipments climbed to 2.2 million bpd in November, roughly +164,000 bpd higher than in October.
Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Dec 1 were right on the seasonal 5-year average, (2) gasoline inventories were -0.5% below the seasonal 5-year average, and (3) distillate inventories were -11.6% below the 5-year seasonal average. U.S. crude oil production in the week ending Dec 1 fell -0.8% m/m to 13.1 million bpd, just below the previous week's record high of 13.2 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended Dec 8 fell by -2 rigs to 503 rigs, modestly above the 1-3/4 year low of 494 rigs from Nov 10. The number of U.S. oil rigs has fallen this year after moving sharply higher during 2021-22 from the 18-year pandemic low of 172 rigs posted in Aug 2020 to a 3-1/2 year high of 627 rigs 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.
