Oct WTI crude oil (CLV24) Tuesday closed up +1.10 (+1.57%), and Oct RBOB gasoline (RBV24) closed up +3.37 (+1.71%).
Crude oil and gasoline prices Tuesday rallied to 2-week highs and settled moderately higher. Crude rallied Tuesday as stronger-than-expected US economic news showed economic strength that is bullish for energy demand. Crude also has carryover support from the disruption of crude exports from Libya, which has tightened global supplies. Gains in crude accelerated on concerns of escalation of hostilities in the Middle East after Lebanon accused Israel of orchestrating an attack that killed several people and wounded nearly 3,000 when their pagers exploded.
Tuesday's US economic reports showed strength that supports energy demand and prices. Aug retail sales unexpectedly rose +0.1% m/m, stronger than expectations of a -0.2% m/m decline. Also, Aug manufacturing production rose +0.9% m/m, stronger than expectations of +0.2% m/m and the largest increase in 6 months.
Concerns that the Israel-Hamas war could escalate into Lebanon and lead to disruption of Middle Eastern crude supplies pushed crude prices higher Tuesday. Lebanon accused Israel of installing malware on pagers used by the Lebanese people that caused the batteries in the pagers to overheat and explode, which left nearly 1,500 Hezbollah militants injured. Pagers are used by Hezbollah fighters for most of their communications on the belief they can avoid interceptions by Israeli intelligence.
Reduced Libyan oil production and exports support oil prices as UN-led talks failed to break an impasse in Libya over control of the country's central bank, leading to reduced crude exports. Libya's crude exports fell to 314,000 bpd last week from 468,00 bpd at the beginning of this month. Earlier this month, Libya's eastern government declared force majeure on all oil fields, terminals, and crude export facilities as it called for a halt to all crude production and exports due to political conflict over who controls the country's central bank and oil revenues.
Signs of weakness in European fuel demand are bearish for crude prices after Italian refiner Eni SpA and Spain's Repsol SA, which together account for about 13% of Europe's oil refining capacity, said they were reducing processing at their plants because of weak margins, a sign of lackluster fuel demand in Europe.
A decline in crude oil held worldwide on tankers is bullish for prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -1.5% w/w to 65.53 million bbl in the week ended September 13.
Crude prices found support after OPEC+ on September 5 agreed to pause its scheduled crude production hike of 180,000 bpd in October and November due to recent weakness in crude prices and signs of fragile global energy demand.
An increase in Russian crude exports is negative for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +40,000 bpd to 3.14 million bpd in the week to September 8. Meanwhile, a decline in Russian crude production is positive for oil prices after Russia's Energy Ministry reported Tuesday that Russia's Aug crude production was 9.059 million bpd, down -30,000 bpd from July but +81,000 bpd above the output target it agreed to with OPEC+.
The consensus is that Wednesday's weekly EIA crude inventories will fall by -100,000 bbl, and gasoline supplies will climb by +1.0 million bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of September 6 were -4.3% below the seasonal 5-year average, (2) gasoline inventories were -0.6% below the seasonal 5-year average, and (3) distillate inventories were -8.6% below the 5-year seasonal average. US crude oil production in the week ending September 6 was unchanged w/w at 13.3 million bpd, just below the record high of 13.4 million bpd from the week of August 16.
Baker Hughes reported last Friday that active US oil rigs in the week ending September 13 rose by +5 rigs to 488 rigs, modestly above the 2-1/2 year low of 477 rigs posted in the week ending July 19. The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted 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.
