August WTI crude oil (CLQ23) this morning is up +0.29 (+0.38%), and Aug RBOB gasoline (RBQ23) is up +2.70 (+1.00%).
Crude oil and gasoline prices this morning are moderately higher, with gasoline climbing to a 3-month nearest-futures high. The outlook for tighter crude supplies is boosting oil prices as Russia's crude shipments fell to a 6-month low. Also, today's rally in the S&P 500 to a 15-month high shows confidence in the economic outlook that supports energy demand and crude prices. Crude prices fell back from their best levels on a stronger dollar and a smaller-than-expected draw in weekly EIA crude inventories.
A bullish factor for crude is a decline in Russian crude shipments. Vessel-tracking data monitored by Bloomberg and corroborated by other sources showed Russian crude shipments in the four weeks to July 16 dropped to 3.1 million bpd, a 6-month low.
Strength in the crude crack spread is bullish for crude prices as the crack spread today climbed to a 1-month high. The stronger crack spread encourages refiners to boost their crude purchases and refine it into gasoline and distillates.
Crude prices were under pressure Monday on news that Libya is restarting crude production at its 250,000 bpd Sharara oil field, its second-largest, after protesters left the facility following their forced shutdown last week. Crude production at the 70,000 bpd El Feel oil field has also resumed.
In a supportive factor for oil prices, Saudi Arabia week in early July said it would extend its unilateral 1 million bpd production cut through August, keeping Saudi Arabia's crude output at about 9 million bpd, the lowest level in several years. Also, Russia pledged to cut 500,000 bpd of crude output in August voluntarily. However, Russia has yet to implement its pledged crude production cuts fully. Russian crude production cuts totaled 350,000 bpd in June, below the 500,000 bpd of cuts it said it would implement in March. Meanwhile, OPEC crude production in June rose +80,000 bpd to 28.57 million bpd.
A decline in crude in floating storage is bullish for prices. Monday's weekly data from Vortexa shows the amount of crude oil held worldwide on tankers that have been stationary for at least a week fell -21% w/w to 94.60 million bbl as of July 14.
An improvement in Chinese crude demand is bullish for prices after government trade data showed China's June crude imports rose +4.6% m/m to 12.72 million bpd, the most in three years.
Today's weekly EIA report was mixed for crude prices. On the bullish side, crude supplies at Cushing, the delivery point of WTI futures, fell -2.89 million bbl. Also, EIA distillate supplies rose +13,000 bbl, fewer than expectations of +1.0 million bbl. On the negative side, EIA crude inventories fell -708,000 bbl, a smaller draw than expectations of -2.5 million bbl. Also, EIA gasoline stockpiles fell -1.07 million bbl, below expectations of -1.5 million bbl.
Today's EIA report showed that (1) U.S. crude oil inventories as of July 14 were +1.1% above the seasonal 5-year average, (2) gasoline inventories were -7.6% below the seasonal 5-year average, and (3) distillate inventories were -14.3% below the 5-year seasonal average. U.S. crude oil production in the week ended July 14 was unchanged w/w at 12.3 million bpd. U.S. crude oil production is well 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 July 14 fell by -3 rigs to a 15-month low of 537 rigs. That is well below the 3-1/4 year high of 627 rigs posted on December 2, 2022. U.S. active oil rigs have more than tripled from the 18-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.
