November WTI crude oil (CLX23) on Tuesday closed unchanged, and Nov RBOB gasoline (RBX23) closed up +1.15 (+0.51%).
Nov WTI crude oil and gasoline prices on Tuesday settled mixed. Crude oil prices were little changed as diplomatic efforts to contain the Israeli-Hamas war lessened the chance the conflict would spread and threaten Middle Eastern crude supplies. Crude oil prices saw some underlying support Tuesday from a weaker dollar and stronger-than-expected U.S. economic news.
An easing of tensions in the Middle East is weighing on crude prices as the U.S. and its allies ramp up diplomatic efforts to contain the conflict between Israel and Hamas. German Chancellor Scholz is expected to arrive in Israel on Tuesday, and U.S. President Biden will travel to Israel on Wednesday. President Biden will also travel to Jordan to meet with Arab leaders, including Jordan King Abdullah II, Egyptian President Abdel Fatah El-Sisi, and Palestinian Authority President Mahmoud Abbas.
Tuesday’s stronger-than-expected U.S. economic news supported energy demand and crude prices. Sep retail sales rose +0.7% m/m and +0.6% m/m ex-autos, stronger than expectations of +0.3% m/m and +0.2% m/m ex-autos. Also, Sep manufacturing production rose +0.4% m/m, stronger than expectations of unchanged m/m. On the negative side, the Oct NAHB housing market index fell -4 to a 9-month low of 40, weaker than expectations of 44.
Comments Monday 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 was Monday'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.
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. 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 -0.5% w/w to 74.71 million bbl as of Oct 13, the lowest in 10 months.
The consensus is that Wednesday's weekly EIA crude inventories will fall by -550,000 bbl.
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.
