Nov WTI crude oil (CLX24) Friday closed down -1.45 (-2.05%), and Nov RBOB gasoline (RBX24) closed down -4.48 (-2.19%).
Crude and gasoline prices dropped to 2-week lows on Friday and settled moderately lower. Weak crude demand from China weighed on oil prices Friday. Also, crude is under pressure on speculation that Israel's killing of Hamas leader Sinwar could lead to a cease-fire in Gaza that eases Middle East tensions. A weaker dollar Friday was supportive of energy prices.
Crude demand in China has weakened and is weighing on oil prices. According to data compiled by Bloomberg, China's total apparent oil demand in Sep fell -6.98% y/y to 14.176 million bpd, and total Chinese oil demand this year (Jan-Sep) is down -3.8% y/y to 13.99 million bpd. China is the world's second-largest crude consumer.
A negative factor for crude was Tuesday's report from the Washington Post that said Israeli Prime Minister Netanyahu told the Biden administration he is willing to strike military rather than oil or nuclear facilities in Iran in retaliation for Iran's missile attack on Israel on October 1.
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 seven days rose by +24% w/w to 58.58 million bbl in the week ended October 11.
A bearish factor for crude oil is ramped-up crude output in Libya after the resolution of a political standoff that had curbed the country's crude production and exports. Libya's National Oil Corp said Sunday that Libya's crude production rose to 1.3 million bpd, the most in two months, which boosts global crude supplies.
Crude prices have support from the likelihood that Israel will retaliate against Iran for its missile attack on Israel on October 1, which could further escalate hostilities in the Middle East. JPMorgan Chase said that given the low level of global oil inventories, the odds favor a sustained geopolitical premium in crude prices until the conflict between Israel and Iran is resolved.
Crude prices found support after OPEC+ on September 5 agreed to pause its scheduled crude production hike of 180,000 bpd in October and November due to recent weakness in crude prices and signs of fragile global energy demand. However, the Financial Times reported on September 26 that Saudi Arabia is ready to abandon its unofficial oil price target of $100 a barrel to regain its market share and is committed to returning its crude production as planned on December 1. OPEC crude production in September fell -480,000 bpd to an 8-month low of 26.51 million bpd
A decline in Russian crude exports is supportive of crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -60,000 bpd to 3.31 million bpd in the week to October 13. Also, Russia's Energy Ministry reported last Wednesday that Russia's Sep crude production was 8.97 million bpd, down -13,000 bpd from Aug and just below the 8.98 million bpd output target it agreed to with OPEC+.
Thursday's EIA report showed that (1) US crude oil inventories as of October 11 were -4.8% below the seasonal 5-year average, (2) gasoline inventories were -3.9% below the seasonal 5-year average, and (3) distillate inventories were -9.8% below the 5-year seasonal average. US crude oil production in the week ending October 11 rose +0.7% w/w to a record 13.5 million bpd.
Baker Hughes reported Friday that active US oil rigs in the week ending October 18 rose by +1 rig to 482 rigs, just 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.
