September WTI crude oil (CLU23) this morning is up +1.02 (+1.23%), and Sep RBOB gasoline (RBU23) is up +6.70 (+2.35%).
Crude oil and gasoline prices this morning are moderately higher, with crude climbing to an 8-3/4 month high. Oil prices are higher on concern that Russian crude oil exports could be disrupted by the Russian-Ukraine war. Crude oil prices fell back from their best levels after weekly EIA crude inventories rose more than expected.
Crude has support on Tuesday's comments from Ukraine President Zelensky, who said his country would retaliate against Russian ships in the Black Sea if Russia continued to block Ukrainian ports. Ukrainian drones on Sunday attacked a Russian oil tanker in the Black Sea, a route that accounts for 20% of the oil that Russia sells daily on global markets.
Crude prices have carryover support from last Thursday when Saudi Arabia and Russia said they would extend their crude production cuts. Saudi Arabia on Thursday said it will extend its 1 million bpd cut in crude production into September and said its crude output may "be extended, or extended and deepened." The cut in Saudi production keeps its crude output at about 9 million bpd, the lowest level in several years. Meanwhile, Russian Deputy Prime Minister Novak said Russia "will continue to voluntarily reduce its oil supply in September by 300,000 bpd" to balance the market. Russia cut its crude output by 500,000 bpd in August.
OPEC crude production in July fell -900,000 bpd to a 1-3/4 year low of 27.79 million bpd.
A bullish factor for crude oil is a decline in Russian crude shipments. Vessel-tracking data monitored by Bloomberg showed Russian crude oil shipments in the four weeks to Aug 6 dropped to 3.02 million bpd, about 870,000 bpd below the peak in mid-May.
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 -4.6% w/w to 103.05 million bbl as of Aug 4.
In a bearish factor, China's July crude imports fell -19% m/m to 10.33 million bpd, the smallest volume in 6 months. Also, Vortexa said China's onshore crude inventories have expanded to a record 1.02 billion bbl.
A decline in crude demand in India, the world's third-biggest crude consumer, is bearish for oil prices. India's Jun crude oil imports fell -1.3% y/y to 19.7 MMT, the lowest in 7 months.
Today's weekly EIA crude report was mixed for crude prices. On the bullish side, EIA gasoline stockpiles fell -2.66 million bbl, a larger draw than expectations of -200,000 bbl. Also, EIA distillate supplies unexpectedly fell -1.71 million bbl versus expectations of a +386,000 bbl build. On the bearish side, EIA crude inventories rose +5.85 million bbl, a larger increase than expectations of +2.3 million bbl. Also, U.S crude production in the week ended Aug 4 rose +3.3% w/w to 12.6 million bpd, the most in over three years.
Today's weekly EIA report showed that (1) U.S. crude oil inventories as of Aug 4 were -0.4% below the seasonal 5-year average, (2) gasoline inventories were -7.2% below the seasonal 5-year average, and (3) distillate inventories were -16.7% below the 5-year seasonal average. U.S. crude oil production in the week ended Aug 4 jumped +3.3% w/w to 12.6 million bpd, the most in over three years. 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 Aug 4 fell by -4 rigs to a 17-month low of 525 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 are more than triple 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.
