December WTI crude oil (CLZ23) this morning is down -3.32 (-4.33%), and Dec RBOB gasoline (RBZ23) is down -0.0807 (-3.67%).
Crude oil and gasoline prices this morning are sharply lower, with crude falling to a 4-month low and gasoline sinking to an 11-month low. Crude prices have a negative carryover from Wednesday, when the EIA reported that weekly crude inventories rose more than expected. Also, fund selling in crude emerged today as weaker-than-expected global economic news weighs on the energy demand outlook and crude prices.
Today's global economic news was bearish for energy demand and crude prices. U.S. weekly continuing claims rose +32,000 to a 2-year high of 1.865 million, showing a weaker labor market than expectations of 1.843 million. Also, Oct manufacturing production fell -0.7% m/m, weaker than expectations of -0.4% m/m and the biggest decline in 4 months. Finally, China Oct new home prices fell -0.38% m/m, the biggest decline in 8-1/2 years and the fifth consecutive month that home prices have fallen.
Expectations for increased travel in the U.S. over the Thanksgiving holiday are supportive of fuel demand and crude prices. According to the American Automobile Association (AAA) forecast, 55.4 million Americans are expected to travel 50 miles or more from home over the holiday, the third most in records from 2000.
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.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Nov 10 were -2.4% below the seasonal 5-year average, (2) gasoline inventories were -1.2% below the seasonal 5-year average, and (3) distillate inventories were -13.6% below the 5-year seasonal average. U.S. crude oil production in the week ended Nov 10 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.
