December WTI crude oil (CLZ23) this morning is up +1.07 (+1.42%), and Dec RBOB gasoline (RBZ23) is up +0.0499 (+2.34%).
Crude oil and gasoline prices this morning are moderately higher as they recover modestly from the plunge seen on Tue-Wed. Technical short covering is giving crude prices a boost today after prices fell to a 3-1/2 month low on Wednesday. A weaker dollar today is also supportive of crude.
Comments today from RBC's Global Commodity Strategy group were supportive of crude when they said, "the chances that Saudi Arabia will extend its unilateral 1 million bpd cut well into Q1 of 2024 is increasing given the renewed market concerns about Chinese demand and the broader macro outlook."
Today's weaker-than-expected global economic news was bearish for energy demand and crude prices. Weekly U.S. continuing unemployment claims rose +22,000 to a 6-1/2 month high of 1.834 million, showing a weaker labor market than expectations of 1.820 million. Also, China's Oct CPI fell -0.2% y/y, weaker than expectations of -0.1% y/y. In addition, the Japan Oct eco watchers outlook survey fell -1.1 to a 10-month low of 48.4, weaker than expectations of no change at 49.5.
Sunday's comments from leaders of Saudi Arabia and Russia were supportive of crude oil prices as they said they will stick with their oil production cuts of more than 1 million bpd until the end of the year. The full 23-nation OPEC+ coalition will hold a ministerial meeting on Nov 26 to review its crude production policy for 2024.
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.
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 -6.7% w/w to 74.10 million bbl as of Nov 3.
Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Oct 27 were -5.2% below the seasonal 5-year average, (2) gasoline inventories were +2.1% above the seasonal 5-year average, and (3) distillate inventories were -12.2% below the 5-year seasonal average. U.S. crude oil production in the week ended Oct 27 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 3 fell by -8 rigs to 496 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.
