July WTI crude oil (CLN23) on Tuesday closed down -0.41 (-0.57%), and July RBOB gasoline (RBN23) closed up +3.99 (+1.58%).
Crude oil and gasoline prices Tuesday settled mixed. A stronger dollar Tuesday weighed on crude prices. Crude was also under pressure from concerns that a slowdown in the global economy would reduce energy demand. Crude recovered from its worst levels after the World Bank raised its 2023 global GDP forecast.
Crude prices fell more than -20 cents/bbl below their Tuesday afternoon closing level after the API reported that U.S. crude supplies fell -1.71 million bbl and gasoline stockpiles rose +2.42 million bbl last week. The consensus is for Wednesday's weekly EIA crude inventories to climb +1.5 million bbl.
Weaker-than-expected global economic news Tuesday was bearish for energy demand and crude prices. Eurozone Apr retail sales were unchanged m/m, weaker than expectations of +0.2% m/m. Also, German Apr factory orders unexpectedly fell -0.4% m/m, weaker than expectations of +2.8% m/m. In addition, Japan's Apr household spending fell -4.4% y/y, weaker than expectations of -2.4% y/y and the biggest decline in over two years.
The World Bank's hike in its 2023 global GDP forecast to +2.1% from the +1.7% forecast in January signaled stronger energy demand and was bullish for crude prices.
Strength in the crude crack spread is supportive for crude prices as the crack spread Tuesday rose to a 1-week high. The higher spread may prompt refiners to boost their crude purchases and refine the crude into gasoline and distillates.
Crude prices jumped Monday after OPEC+ Sunday agreed to maintain its crude production levels. However, Saudi Arabia said it will voluntarily cut its crude output by 1 million bpd starting in July, and Saudi Energy Minister Price Abdulaziz bin Salman said he "will do whatever is necessary to bring stability to the oil market." He also said that next month's additional cuts could be extended, but they will keep the market "in suspense" about whether this will happen. OPEC May crude production fell -500,00 bpd to a 16-month low of 28.26 million bpd.
Crude oil prices are being undercut by signs that Russia has not delivered on its threat to cut crude output. Tanker-tracking data from Bloomberg shows Russia's crude exports in the four weeks to June 4 rose to 3.73 million bpd from a revised 3.68 million bpd in the four-week period to May 28. Crude shipments from Russian ports are +1.4 million bpd higher than at the end of 2022, with most of the crude going to India and China. Russia has halted the publication of crude and condensate production data in an attempt to disguise if it has actually cut crude output.
Crude prices also garnered support Monday after Saudi Arabia's state-owned Aramco said it would raise oil prices in July for all customers of Arab light crude.
On the negative side, India's Apr crude imports fell -8.3% y/y to 19.8 MMT as processors curbed operating rates amid a drop in petroleum-product exports. India is the world's third-largest crude-consuming country in the world.
In a bearish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +1.8% w/w to 101.46 million bbl in the week ended June 2.
Last Thursday's EIA report showed that (1) U.S. crude oil inventories as of May 26 were -2.0% below the seasonal 5-year average, (2) gasoline inventories were -7.8% below the seasonal 5-year average, and (3) distillate inventories were -16.6% below the 5-year seasonal average. U.S. crude oil production in the week ended May 26 fell -0.8% w/w to 12.1 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 June 2 fell by -15 to a 13-month low of 555 rigs, falling further 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.
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.
