December WTI crude oil (CLZ23) on Wednesday closed down -1.60 (-2.04%), and Dec RBOB gasoline (RBZ23) closed down -0.0210 (-0.94%).
Crude oil and gasoline prices Wednesday settled moderately lower. A stronger dollar Wednesday weighed on energy prices. Crude prices extended their losses after Wednesday's weekly EIA report showed crude inventories rose more than expected. Losses in crude were limited by signs of strength in China's economy after China's Oct industrial production rose more than expected. Also, Wednesday's rally in the S&P 500 rose to a 2-1/2 month high increases confidence in the economic outlook that supports energy demand and crude prices.
Wednesday's global economic news was mixed for crude prices. On the bearish side, the European Commission cut its Eurozone 2023 GDP forecast to 0.6% from a September forecast of 0.8%. Also, Eurozone Sep industrial production fell -1.1% m/m, weaker than expectations of -1.0% m/m. In addition, Japan's Q3 GDP fell -2.1% (q/q annualized), weaker than expectations of -0.4%. On the bullish side, China Oct industrial production rose +4.6% y/y, stronger than expectations of +4.5% y/y and the largest increase in 6 months. Also, the U.S. Nov Empire manufacturing survey general business conditions rose +13.7 to a 7-month high of 9.1, stronger than expectations of -3.0.
Strength in the crude crack spread is bullish for oil prices. The crack spread rose to a 1-1/2 month high Wednesday, encouraging refiners to boost their crude purchases and refine the crude into gasoline and distillates.
Expectations for increased travel in the U.S. over the Thanksgiving holiday are supporting fuel demand and crude prices. According to the American Automobile Association (AAA) forecast, 55.4 million Americans are expected to travel 50 miles or more from home over the holiday, the third most in records from 2000.
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 -26% w/w to 58.17 million bbl as of Nov 10, the lowest in 2-3/4 years.
Increased crude consumption in India, the world's third largest crude consumer, is bullish for oil prices after India's oil product consumption in October rose +3.7% y/y to 19.3 MMT, the highest five months.
An increase in Russian crude exports is bearish for oil prices. Tanker-tracking data monitored by Bloomberg shows 3.48 million bpd of crude was shipped from Russian ports in the four weeks to Nov 5, near the highest in four months.
In a bearish factor for crude oil, the U.S. on Oct 18 said it would ease sanctions for six months on Venezuela's oil exports in exchange for steps to ensure the country holds fair presidential elections next year. An easing of sanctions would put additional crude supplies on the global market, with some analysts estimating about 200,000 bpd of additional supplies.
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. OPEC Oct crude production was little changed, rising +50,000 bpd to 28.08 million bpd.
Wednesday's weekly EIA report was mixed for crude and products. On the bearish side, EIA crude inventories rose +3.6 million bbl, above expectations of +2.0 million bbl. Also, crude supplies at Cushing, the delivery point of WTI futures, rose +1.9 million bbl. On the bullish side, EIA gasoline stockpiles unexpectedly fell -1.5 million bbl versus expectations of a +1.5 million bbl increase. Also, EIA distillate supplies fell -1.4 million bbl, more than expectations of -1.1 million bbl.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Nov 10 were -2.4% below the seasonal 5-year average, (2) gasoline inventories were -1.2% below the seasonal 5-year average, and (3) distillate inventories were -13.6% below the 5-year seasonal average. U.S. crude oil production in the week ended Nov 10 was unchanged w/w at a record high of 13.2 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended Nov 10 fell by -2 rigs to 494 rigs, posting a new 1-3/4 year low. 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.
