Sep WTI crude oil (CLU24) on Tuesday closed down -1.08 (-1.42%), and Sep RBOB gasoline (RBU24) closed down -2.50 (-1.05%).
Crude oil prices Tuesday extended Monday's slide, with crude posting a new 7-week low. Tuesday's rally in the dollar index (DXY00) to a 2-1/2 week high was bearish for energy prices. Also, energy demand concerns in China, the world's second-largest crude consumer, are weighing on crude prices after Citigroup cut its 2024 China GDP estimate to 4.8% from 5.0%.
Tuesday's global economic news was stronger than expected and positive for energy demand and crude prices. US Jun JOLTS job openings fell -46,000 to 8.184 million, showing a stronger labor market than expectations of 8.000 million. Also, the Conference Board US Jul consumer confidence index rose +2.5 to 100.3, stronger than expectations of 99.7. In addition, Eurozone Q2 GDP grew +0.3% q/q and +0.6% y/y, stronger than expectations of +0.2% q/q and +0.5% y/y. Finally, the Japan Jun jobless rate unexpectedly fell -0.1 to 2.5%, showing a stronger labor market than expectations of no change at 2.6%.
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 worldwide 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.
The consensus is that Wednesday's weekly EIA crude inventories will fall by -1.1 million bbl, and gasoline supplies will drop by -1.29 million bbl.
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.
