Sep WTI crude oil (CLU24) Monday closed down -1.35 (-1.75%), and Sep RBOB gasoline (RBU24) closed down -4.47 (-1.85%).
Crude oil prices Monday posted moderate losses, with crude tumbling to a 7-week low. Monday's rally in the dollar index (DXY00) to a 2-week high undercut energy prices. Also, energy demand concerns in China, the world's second-largest crude consumer, are weighing on crude prices after China recently reported Q2 GDP that was the slowest economic growth in five quarters.
Crude oil prices have underlying support from the Hamas-Israel conflict. Israel's military continues to conduct operations in Gaza, and there is the continued risk that the war might spread to Hezbollah in Lebanon or even to a direct conflict with Iran. Meanwhile, ongoing 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.
An increase in crude oil held around the world on tankers is bearish for prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days rose by +1.1% to 78.45 million bbl in the week ended July 26.
OPEC+ rolled out a plan to restore some crude production in Q4, which sparked worries about a glut in global oil supplies. On June 2, OPEC+ extended the 2 million bpd of voluntary crude production cuts into Q3 but said they would gradually phase out the cuts over the following 12 months, beginning in October. OPEC pledged to extend its crude production cap at about 39 million bpd to the end of 2025. Also, the UAE was given a 300,000 bpd boost to its production target for 2025. In June, OPEC crude production fell -80,000 bpd to 26.98 million bpd.
In last Wednesday's EIA report, US crude oil inventories in the week ended July 19 fell by -3.74 million bbls, a larger drop than expectations of -3.5 million bbls. Gasoline inventories fell by -5.572 million bbls, the largest drop since March. The EIA report showed that (1) US crude oil inventories as of July 19 were -5.1% below the seasonal 5-year average, (2) gasoline inventories were -1.8% 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 July 19 was unchanged w/w and matched a record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending July 26 rose by +5 rigs to 482 rigs, recovering modestly from 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.
