August WTI crude oil (CLQ24) today is up +0.56 (+0.67%), and Aug RBOB gasoline (RBQ24) is up +1.72 (+0.66%).
Crude oil and gasoline prices today are moderately higher, with crude climbing to a 2-1/2 month high and gasoline posting a 2-month high. Today's decline in the dollar index (DXY00) to a 3-week low is bullish for energy prices. Crude also has carryover support from Wednesday when the EIA reported crude and gasoline inventories fell more than expected. Limiting gains in crude are global energy demand concerns after Saudi Aramco Thursday cut prices for all of its oil grades to Asia for August delivery, the second straight month prices have been cut.
Crude oil has support on the concern that a stronger-than-expected US hurricane season could lead to reduced US crude output, which is supporting prices after Hurricane Beryl strengthened to a Category 5 hurricane, the strongest storm to ever form in the Atlantic this early in the year.
Today's global economic news was weaker than expected and bearish for energy demand and crude prices. The US Jun unemployment rate unexpectedly rose +0.1 to a 2-1/2 year high of 4.1%, showing a weaker labor market than expectations of no change at 4.0%. Also, German May industrial production unexpectedly fell -2.5% m/m, weaker than expectations of a +0.1% m/m increase and the biggest decline in 17 months. In addition, Japan's May household spending unexpectedly fell -1.8% y/y, weaker than expectations of +0.3% y/y and the biggest drop in 4 months.
Crude oil prices have underlying support from concern about the escalation of the Hamas-Israel conflict. Israel's military continues to conduct operations in Gaza, and there is also concern that the war might spread to Hezbollah in Lebanon or even to a direct conflict with Iran as hostilities escalate between Israel and Hezbollah. 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.
Higher than-expected Russian crude output and exports are bearish for oil prices. Russian crude production averaged 9.39 million bpd in May, which was +3.8% above its agreed target of 9.049 million bpd. Also, Russian fuel exports in the week to June 30 rose by +620,000 bpd to 3.67 million bpd, the most in two months.
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 -24% w/w to 73.29 million bbl as of June 28.
OPEC+ rolled out a plan to restore some crude production in Q4, which sparked worries about a glut in global oil supplies. OPEC+, on June 2, 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 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 June 28 were -3.8% below the seasonal 5-year average, (2) gasoline inventories were -0.8% below the seasonal 5-year average, and (3) distillate inventories were -9.6% below the 5-year seasonal average. US crude oil production in the week ending June 28 was unchanged w/w at 13.2 million bpd, just below the recent record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending June 28 fell -6 rigs to a 2-1/2 year low of 479 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.
