August WTI crude oil (CLQ23) Tuesday closed down -1.67 (-2.41%), and Aug RBOB gasoline (RBQ23) closed down -3.27 (-1.33%).
Crude oil fell as concern resurfaced about Chinese and global economic growth. ECB President Lagarde Tuesday reiterated hawkish comments. Also, there is no longer any concern about Russian oil output disruptions from the weekend insurrection after Wagner Group leader Prigozhin arrived Tuesday in Belarus for his exile.
Oil prices continue to be undercut by concern about weaker Chinese energy demand. China's National Petroleum Corp (CNPC), China's largest oil and gas producer, last Tuesday, cut its 2023 China crude oil demand forecast to +3.5% to 740 MMT from a March forecast of +5.1% to 756 MMT. In another sign of weak Chinese oil demand, analytics firm Kpler recently reported that China's crude oil stockpiles rose to a 2-year high in May of 966 million bbl, well above the five-year average of 858 million bbl.
Crude prices jumped earlier this month after OPEC+ on June 4 agreed to maintain its crude production levels. However, Saudi Arabia said it will voluntarily cut its crude output by 1 million bpd starting in July, and Saudi Energy Minister Price Abdulaziz bin Salman said he "will do whatever is necessary to bring stability to the oil market." He also said that next month's additional cuts could be extended, but they will keep the market "in suspense" about whether this will happen. OPEC May crude production fell -500,00 bpd to a 16-month low of 28.26 million bpd.
Last Thursday's EIA report showed that (1) U.S. crude oil inventories as of June 16 were -0.7% below the seasonal 5-year average, (2) gasoline inventories were -7.2% below the seasonal 5-year average, and (3) distillate inventories were -14.2% below the 5-year seasonal average. U.S. crude oil production in the week ended June 16 fell -200,000 bpd (-1.6%) to 12.2 million from the 3-year high of 12.4 million bpd posted in the week ended June 9. U.S. crude oil production is moderately 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 June 23 fell by -6 to a 1-1/4 year low of 546 rigs. That is well below the 3-1/4 year high of 627 rigs posted on December 2, 2022. U.S. active oil rigs have more than tripled from the 18-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.
