December WTI crude oil (CLZ23) on Monday closed up +1.09 (+1.41%), and Dec RBOB gasoline (RBZ23) closed up +0.0464 (+2.12%).
Crude oil and gasoline prices Monday posted moderate gains. A weaker dollar on Monday was supportive of energy prices. Also, expectations for an increase in U.S. fuel demand over the Thanksgiving holiday are bullish for crude prices. Monday's weaker-than-expected global economic news bolstered global energy demand concerns and limited gains in crude prices.
Expectations for increased travel in the U.S. over the Thanksgiving holiday are supportive of fuel demand and crude prices. According to a forecast from the American Automobile Association (AAA), 55.4 million Americans are expected to travel 50 miles or more from home over the holiday, the third most in records going back to 2000.
Monday's global economic news was bearish for energy demand and crude prices. China Oct aggregate financing, the broadest measure of credit growth, rose +1.85 trillion yuan, weaker than expectations of 1.95 trillion yuan. Also, Japan Oct machine tool orders fell -20.6% y/y, the biggest decline in 4 months, and the tenth consecutive month orders have declined.
Strength in the crude crack spread supports crude prices as the crack spread Monday rose to a 1-1/4 month high, encouraging refiners to boost their crude purchases and refine the crude into gasoline and distillates.
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.
The Nov 1 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 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.
