May WTI crude oil (CLK23) on Monday closed up +4.75 (+6.28%), and May RBOB gasoline (RBJ23) closed up +7.65 (+2.85%).
Crude oil and gasoline prices Monday rallied sharply, with crude posting a 2-1/4 month high and gasoline posting a 5-1/4 month high. The main bullish factor was the action by OPEC+ on Sunday to cut its crude output by 1 million bpd unexpectedly. Gains in crude accelerated Monday after the dollar index dropped to a 1-week low.
Crude prices surged Monday after OPEC+ on Sunday announced a surprise oil production cut of more than 1 million bpd starting May 1. Saudi Arabia said the cuts were a "precautionary measure aimed at supporting the stability of the oil market."
Crude prices have carryover support on global supply concerns due to the ongoing halt of 400,000 bpd of oil exports from the Turkish port of Ceyhan. The Iraqi government and Kurdish officials have yet to agree on the resumption of oil exports from Ceyhan, as Iraq says Turkey should not allow Kurdish oil to be exported from the Turkish port without Iraqi government approval. Iraq won an arbitration case last week from the International Chamber of Commerce that said Turkey violated a 1973 pipeline transit agreement by allowing crude from the Kurdish region to be exported without Iraqi government consent.
The outlook for stronger Chinese crude oil demand is bullish for prices. China National Petroleum Corp, the country's largest refiner, predicts that oil demand in China may expand this year by +5.1% to 756 MMT as the country emerges from the pandemic. However, oil demand in China has recently been weak. China car sales in Jan-Feb fell -9.4% y/y and international flights from China were at only 22% of pre-pandemic levels as of March 16.
Goldman Sachs Monday raised its forecast for Brent crude to $95 per barrel by December from a prior forecast of $90 and hiked its December 2024 price forecast to $100 per barrel from $97.
Weakness in the crude crack spread is bearish for oil prices. The crack spread Monday fell to a 3-week low, discouraging refiners from purchasing crude oil to refine it into gasoline and distillates.
In a bearish factor, Vortexa Monday reported that the amount of crude stored on tankers that have been stationary for at least a week rose +5.4% w/w to 104.60 million bbl in the week ended March 31.
Rising crude demand in India is bullish for oil prices. India's oil ministry reported on March 22 that India Feb crude oil imports rose +8.5% y/y to 19.1 MMT, the most in seven months.
Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of March 24 were +5.7% above the seasonal 5-year average, (2) gasoline inventories were -4.6% below the seasonal 5-year average, and (3) distillate inventories were -8.7% below the 5-year seasonal average. U.S. crude oil production in the week ended March 24 fell -0.8% w/w to 12.2 million bpd, only 0.9 million bpd (-6.9%) 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 March 31 fell by -1 rig to 592 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2. U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
