August WTI crude oil (CLQ23) Friday closed down -0.35 (-0.50%), and Aug RBOB gasoline (RBQ23) closed down -3.49 (-1.41%).
Crude oil and gasoline prices Friday extended Thursday's sell-off on economic gloom driven by the weak U.S. and Eurozone purchasing manager reports. The preliminary-June S&P U.S. PMI fell by -2.1 points to a 6-month low of 46.3, weaker than expectations for a +0.1 point increase to 48.5. Meanwhile, the preliminary-June S&P Eurozone composite PMI fell by -2.5 points to a 5-month low of 50.3, much weaker than market expectations of 52.5.
Oil market traders were already gloomy about energy demand after Fed Chair Powell's hawkish testimony earlier this week and after the Bank of England's +50 bp rate hike. Crude oil prices were also undercut by Friday's +0.50% rally in the dollar index.
In a bearish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +5% w/w to 107.12 million bbl in the week ended June 16.
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, on 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.
Thursday's EIA report was generally supportive (the report was delayed by a day due to Monday's holiday). Crude oil inventories in the week ended June 16 fell by -3.83 million bbls, showing less oil supply than expectations for a +450,000 bbl build. Gasoline inventories rose by +479,000, a smaller build than expectations of +800,000 bbl. Distillate inventories rose by +434,000, less than expectations for a +1.0 million build. Crude oil inventories at Cushing fell by -98,000 bbl.
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 Friday that active U.S. oil rigs in the week ended June 23 fell by -6 to 546 rigs, a 1-1/4 year low. 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.
