Sep WTI crude oil (CLU24) Tuesday closed up +0.26 (+0.36%), and Sep RBOB gasoline (RBU24) closed down -0.74 (-0.32%).
Crude oil and gasoline prices Tuesday settled mixed. Tuesday's rebound in US equity markets sparked risk-on sentiment that boosted most asset markets. Also, reduced oil supplies from Libya are lifting oil prices after Libya shut production at its biggest oil field on Monday. A stronger dollar Tuesday limited the upside in energy prices.
Crude prices are supported by fears of a retaliatory attack by Iran against Israel, which could escalate conflict in the Middle East and disrupt the region's crude oil supplies. Iran has threatened to retaliate against Israel for last week's assassination of a Hamas leader in Tehran. Israel's military continues to conduct operations in Gaza, and there is the 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.
Crude is underpinned by reduced crude output from Libya after the Sharara oil field, Libya's biggest, halted crude production due to anti-government protests and security concerns. The Sharara oil field produced 270,000 bpd before it was shut down on Monday.
A plunge in crude oil held worldwide on tankers is bullish for prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -31% w/w to 56.66 million bbl in the week ended August 2, the lowest in more than four years.
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.
The consensus is that Wednesday's weekly EIA crude inventories will decline by -1.8 million bbl, and gasoline supplies will also fall by -1.8 million bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of July 26 were -4.4% below the seasonal 5-year average, (2) gasoline inventories were -3.3% below the seasonal 5-year average, and (3) distillate inventories were -6.6% below the 5-year seasonal average. US crude oil production in the week ending July 26 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 August 2 were unchanged at 482 rigs, modestly above 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.
