July WTI crude oil (CLN23) on Thursday closed down -1.24 (-1.71%), and July RBOB gasoline (RBN23) closed down -2.85 (-1.08%).
Crude oil and gasoline prices this morning gave up an early advance and posted moderate losses on reports that Iran and the U.S. have made progress in talks over Iran's nuclear program, which could pave the way for more Iranian crude exports. Crude prices recovered from their worst levels Thursday after the dollar index (DXY00) dropped to a 2-week low.
Crude prices dropped Thursday after the Israeli newspaper Haaretz said Iran and the U.S. have made progress over Iran's nuclear program, which could lead to an easing of sanctions on Iranian crude exports and allow additional crude supplies into the global market.
Concern about a slowdown in the global economy is bearish for energy demand after Thursday's news that U.S. weekly initial unemployment claims rose +28,000 to a 19-month high of 261,000, showing a weaker labor market than expectations of 235,000. Also, Eurozone Q1 GDP was revised downward to -0.1% q/q and +1.0% y/y from the previously reported unchanged q/q and +1.2% y/y.
Chinese crude demand improved last month after China's May crude imports climbed to 12.16 million bpd, up +17% from April.
Crude prices jumped Monday after OPEC+ Sunday agreed to maintain its crude production levels. However, Saudi Arabia said it will voluntarily cut its crude output by 1 million bpd starting in July, and Saudi Energy Minister Price Abdulaziz bin Salman said he "will do whatever is necessary to bring stability to the oil market." He also said that next month's additional cuts could be extended, but they will keep the market "in suspense" about whether this will happen. OPEC May crude production fell -500,00 bpd to a 16-month low of 28.26 million bpd.
Crude oil prices are being undercut by signs that Russia has not delivered on its threat to cut crude output. Tanker-tracking data from Bloomberg shows Russia's crude exports in the four weeks to June 4 rose to 3.73 million bpd from a revised 3.68 million bpd in the four-week period to May 28. Crude shipments from Russian ports are +1.4 million bpd higher than at the end of 2022, with most of the crude going to India and China. Russia has halted the publication of crude and condensate production data in an attempt to disguise if it has actually cut crude output.
On the negative side, India's Apr crude imports fell -8.3% y/y to 19.8 MMT as processors curbed operating rates amid a drop in petroleum-product exports. India is the world's third-largest crude-consuming country in the world.
In a bearish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +1.8% w/w to 101.46 million bbl in the week ended June 2.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of June 2 were -2.2% below the seasonal 5-year average, (2) gasoline inventories were -7.5% below the seasonal 5-year average, and (3) distillate inventories were -15.6% below the 5-year seasonal average. U.S. crude oil production in the week ended June 2 rose +1.6% w/w to a 3-year high of 12.4 million bpd, only 0.7 million bpd (-5.3%) 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 June 2 fell by -15 to a 13-month low of 555 rigs, falling further below the 2-1/2 year high of 627 rigs posted on December 2. U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
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.
