May WTI crude oil (CLK24) on Tuesday closed down -0.05 (-0.06%), and May RBOB gasoline (RBK24) closed up +3.84 (+1.38%).
Crude and gasoline prices on Tuesday settled mixed. Tuesday's rally in the dollar index (DXY00) to a 5-1/2 month high weighed on energy prices. However, losses in crude were limited by Middle Eastern geopolitical risks as the markets await any response from Israel to Iran's weekend drone and missile attack against Israel.
Crude oil prices are supported by Israel-Iran tensions. Top Israeli military officials said Monday that their country has no choice but to respond to Iran's weekend attack. There are hopes that any Israeli retaliation will be limited and will perhaps conclude the latest round of tensions that began with Israel striking an Iranian consulate in Syria and killing some top Iranian military generals.
A bullish factor for energy demand and crude was Tuesday's action by the International Monetary Fund to raise its 2024 global GDP forecast to 3.2% from a 3.1% forecast in January.
Tuesday's global economic reports were mixed for energy demand and crude oil prices. On the positive side, US Mar manufacturing production rose +0.5% m/m, stronger than expectations of +0.2% m/m. Also, China's Q1 GDP rose +5.3% y/y, which is stronger than expectations of +4.8% y/y. On the negative side, US Mar housing starts fell -14.7% m/m to a 7-month low of 1.321 million, weaker than expectations of 1.485 million. Also, China Mar industrial production rose +4.5% y/y, weaker than expectations of +6.0% y/y.
Reduced crude demand in India, the world's third-largest crude consumer, is negative for oil prices after India's March oil demand fell -0.6% y/y to 21.09 MMT.
Crude has support from the recent Ukrainian drone attacks on Russian refineries that damaged several Russian oil processing facilities, limiting Russia's fuel exporting capacity. Russia's fuel exports in the week to April 7 fell by -450,000 bpd from the prior week to 3.39 million bpd. JPMorgan Chase said it sees 900,000 bpd of Russian refinery capacity that could be offline "for several weeks if not months" from the attacks, adding $4 a barrel of risk premium to oil prices.
Crude prices have support from April 3 when OPEC+, at its monthly meeting, did not recommend any changes to their existing crude output cuts, which kept about 2 million bpd of production cuts in place until the end of June. However, OPEC crude production in March rose +10,000 bpd to 26.860 million bpd, a bearish factor for oil prices as Iraq and UAE continue to pump above their production quotas.
An increase in crude in floating storage is bearish 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 rose +11% w/w to 78.80 million bbl as of April 12.
Crude prices have underlying support from the Israel-Hamas war and concern that the war might spread to Hezbollah in Lebanon. Also, attacks on commercial shipping in the Red Sea by Iran-backed Houthi rebels have forced shippers to divert shipments around the southern tip of Africa instead of going through the Red Sea, disrupting global crude oil supplies.
The consensus is that Wednesday's weekly EIA crude inventories will climb +1.65 million bbl, and gasoline supplies will fall -1.0 million bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of April 5 were -1.9% below the seasonal 5-year average, (2) gasoline inventories were -2.9% below the seasonal 5-year average, and (3) distillate inventories were -5.1% below the 5-year seasonal average. US crude oil production in the week ending April 5 was unchanged w/w at 13.1 million bpd, below the recent record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ended April 12 fell by -2 rigs to 506 rigs, moderately above the 2-year low of 494 rigs posted on November 10. The number of US oil rigs has fallen over the past year from the 3-3/4 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.
