Nov WTI crude oil (CLX24) Friday closed down -0.29 (-0.38%), and Nov RBOB gasoline (RBX24) closed up +0.07 (+0.03%).
Crude oil and gasoline prices Friday gave up early gains and settled mixed. Fuel demand concerns weighed on crude Friday after the University of Michigan US Oct consumer sentiment index unexpectedly fell -1.2 to 68.9, weaker than expectations of an increase to 71.0. Crude prices on Friday initially posted modest gains due to a weaker dollar and a rally in the S&P 500 to a new record high, which shows confidence in the economic outlook that is supportive of energy demand and crude prices. In addition, heightened Middle East tensions are underpinning crude prices on concern an escalation of hostilities could lead to a disruption of the region's crude supplies.
Crude prices are underpinned by the possibility that Israel might retaliate against Iran for its missile attack on Israel by bombing Iran's oil facilities. Israeli Defense Minister Gallant said Israel's response to Iran's missile attack on Israel "will be deadly, precise and above all surprising," while Iran said it's ready to launch thousands of missiles at Israel if needed. Goldman Sachs said Brent crude could surge to $90 a bbl if oil exports from Iran are disrupted. Also, 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.
Strength in the crude crack spread supports crude prices after the crack spread climbed to a 1-1/2 month high Friday, encouraging refiners to boost their crude purchases and refine the crude into gasoline and distillates.
A decline 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 -28% w/w to 49.11 million bbl in the week ended October 7, the lowest in 4-3/4 years.
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 Tuesday that Libya's crude production rose to 1.13 million bpd, the most in two months, which boosts global crude supplies.
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.
A decline in Russian crude exports is supportive of crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -370,000 bpd to 3.37 million bpd in the week to October 6. 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+.
Wednesday's EIA report showed that (1) US crude oil inventories as of October 4 were -4.0% below the seasonal 5-year average, (2) gasoline inventories were -3.7% below the seasonal 5-year average, and (3) distillate inventories were -9.0% below the 5-year seasonal average. US crude oil production in the week ending October 4 rose +0.8% w/w to 13.4 million bpd, tying the record high from the week of August 16.
Baker Hughes reported Friday that active US oil rigs in the week ending October 11 rose by +2 rigs to 481 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.
