December WTI crude oil (CLZ23) this morning is down -2.04 (-2.39%), and Dec RBOB gasoline (RBZ23) is down -6.94 (-3.00%).
Nov WTI crude oil and gasoline prices this morning are sharply lower and posted 1-week lows. A stronger dollar today is weighing on crude prices. Also, an easing of geopolitical risks in the Middle East is weighing on crude prices as Israel delays an expected ground assault of Gaza. Diplomatic efforts to release hostages taken by Hamas could further delay or even prompt Israel not to invade Gaza, potentially keeping the Israeli-Hamas war contained.
An easing of Middle East geopolitical risks is bearish for energy prices. French President Macron called for an international coalition to fight Hamas and warned other Iranian-backed militant groups not to open new fronts in the Israeli-Hamas war as he met with Prime Minister Netanyahu today in Israel. Western countries have intensified efforts to stop the Israeli-Has war from spreading, with EU leaders endorsing a United Nations call for a “humanitarian pause” in the war.
Israel said it supports diplomatic efforts to get Hamas to release hostages from Gaza, a move that could delay a possible ground invasion, although Israel said it won’t wait long to start its ground assault. Iran and its proxy forces in Lebanon, Iraq, and Yemen have warned they could retaliate against Israel if Israeli troops enter Gaza.
An increase in Russian crude exports is bearish for oil prices. Tanker-tracking data monitored by Bloomberg shows 3.53 million bpd of crude was shipped from Russian ports in the week ended Oct 22, an increase of 20,000 bpd from the previous week.
Concerns about weakness in global energy demand are negative for crude prices after Bloomberg reported that ECB President Lagarde told the presidents of the European Commission, the European Council, and the Eurogroup that the Eurozone economy faces stagnation for the next few quarters.
In a bearish factor for crude oil, the U.S. last Wednesday said it would ease sanctions for six months on Venezuela's oil exports in exchange for steps to ensure the country holds fair presidential elections next year. An easing of sanctions would put additional crude supplies on the global market, with some analysts estimating about 200,000 bpd of additional supplies.
The tightness in the oil market is expected to continue due to the extension of OPEC+ production cuts. Saudi Arabia recently said it would maintain its unilateral crude production cut of 1.0 million bpd through December. The move will hold Saudi Arabia's crude output at about 9 million bpd, the lowest level in three years. Russia also recently announced that it would maintain its 300,000 bpd cut in crude production through December. Saudi Arabia and Russia on Wednesday announced that they will retain their crude production cuts until the end of the year. OPEC Sep crude production was little changed, rising +50,000 bpd to 27.97 million bpd.
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 -11% w/w to 63.54 million bbl as of Oct 20, the lowest in 3-1/2 years.
Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Oct 13 were -4.8% below the seasonal 5-year average, (2) gasoline inventories were -0.1% below the seasonal 5-year average, and (3) distillate inventories were -13.3% below the 5-year seasonal average. U.S. crude oil production in the week ended Oct 13 was unchanged w/w at a record high of 13.2 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended Oct 13 rose by +4 to 501 rigs, recovering slightly from the prior week's 20-month low of 497 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 have roughly tripled from the 18-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity from pandemic lows.
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.
