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September WTI crude oil (CLU23) this morning is down -1.76 (-2.139%), and Sep RBOB gasoline (RBU23) is down -2.75 (-0.95%).
Crude oil and gasoline prices this morning are moderately lower. Crude prices are under pressure today on concerns about global oil demand after China reported weaker-than-expected industrial activity and retail sales last month. A weaker dollar today contained losses in crude.
Weakness in China's economy, the second-largest in the world, is negative for crude demand and prices. Today's news showed China's Jul industrial production rose +3.7% y/y, weaker than expectations +4.3% y/y. Also, China's Jul retail sales rose +2.5% y/y, weaker than expectations of +4.0% y/y and the slowest pace of increase in 5 months.
Another negative factor for crude prices is the progress made in Iran-U.S. relations that could lead to higher crude exports from Iran after Iran said last week's deal with the U.S. on the release of prisoners and frozen Iranian funds could lead to diplomacy in other areas, including its nuclear program. An agreement on Iran's nuclear program could prompt the U.S. and its allies to remove sanctions on Iranian crude exports, boosting global crude supplies.
In a bearish factor, China's July crude imports fell -19% m/m to 10.33 million bpd, the smallest volume in 6 months. Also, Vortexa said China's onshore crude inventories have expanded to a record 1.02 billion bbl as of July 27.
A decline in crude demand in India, the world's third-biggest crude consumer, is bearish for oil prices. India's Jun crude oil imports fell -1.3% y/y to 19.7 MMT, the lowest in 7 months.
Crude has support from last Friday's monthly report from the IEA that said global crude oil usage averaged a record 103 million bpd in June and may soar even higher this month. The IEA also said global crude supplies have tightened, leaving oil inventories in developed nations about 115 million bpd below their five-year average.
Crude has support on last Tuesday's comments from Ukraine President Zelensky, who said his country would retaliate against Russian ships in the Black Sea if Russia continued to block Ukrainian ports. Ukrainian drones on August 6 attacked a Russian oil tanker in the Black Sea, a route that accounts for 20% of the oil that Russia sells daily on global markets.
Crude prices have carryover support from earlier this month when Saudi Arabia and Russia said they would extend their crude production cuts. Saudi Arabia said it will extend its 1 million bpd cut in crude production into September and said its crude output may "be extended, or extended and deepened." The cut in Saudi production keeps its crude output at about 9 million bpd, the lowest level in several years. Meanwhile, Russian Deputy Prime Minister Novak said Russia "will continue to voluntarily reduce its oil supply in September by 300,000 bpd" to balance the market. Russia cut its crude output by 500,000 bpd in August.
OPEC crude production in July fell -900,000 bpd to a 1-3/4 year low of 27.79 million bpd.
A bullish factor for crude oil is a decline in Russian crude shipments. Vessel-tracking data monitored by Bloomberg showed Russian crude oil shipments in the four weeks to Aug 6 dropped to 3.02 million bpd, about 870,000 bpd below the peak in mid-May.
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 -4.2% w/w to 99.67 million bbl as of Aug 11.
Last Wednesday's weekly EIA report showed that (1) U.S. crude oil inventories as of Aug 4 were -0.4% below the seasonal 5-year average, (2) gasoline inventories were -7.2% below the seasonal 5-year average, and (3) distillate inventories were -16.7% below the 5-year seasonal average. U.S. crude oil production in the week ended Aug 4 jumped +3.3% w/w to 12.6 million bpd, the most in over three years. U.S. crude oil production is moderately 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 Aug 11 were unchanged at a 17-month low of 525 rigs. That is well below the 3-1/4 year high of 627 rigs posted on Dec 2, 2022. Still, U.S. active oil rigs are more than triple the 18-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity from pandemic lows.
