Sep WTI crude oil (CLU24) on Thursday closed up +0.96 (+1.28%), and Sep RBOB gasoline (RBU24) closed up +4.19 (+1.78%).
Crude oil and gasoline prices posted moderate gains on Thursday. Crude oil prices rallied on reduced US recessionary fears after weekly jobless claims fell more than expected. Crude prices also had carryover support from Wednesday when weekly EIA crude inventories fell more than expected to a 6-month low. In addition, strength in stocks Thursday boosted confidence in the economic outlook, which was positive for energy demand and crude prices. Strength in the dollar on Thursday limited gains in crude prices.
Crude prices are supported by expectations for a retaliatory attack by Iran against Israel, which could escalate the 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.
Reduced crude production in Libya limits global crude supplies and is bullish for prices. Libya's Sharara oil field, the country's biggest, has halted 250,000 bpd of crude production since Monday due to protestors and security concerns.
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.
Wednesday's EIA report showed that (1) US crude oil inventories as of August 2 were -5.6% below the seasonal 5-year average, (2) gasoline inventories were -2.0% below the seasonal 5-year average, and (3) distillate inventories were -6.5% below the 5-year seasonal average. US crude oil production in the week ending August 2 rose +0.8% w/w to a new record high of 13.4 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.
