December WTI crude oil (CLZ24) Tuesday closed up +0.52 (+0.73%), and December RBOB gasoline (RBZ24) closed up +0.0253 (+1.26%).
Crude oil and gasoline prices on Tuesday extended Monday's rally and posted 3-week highs. Tuesday's slide in the dollar index (DXY00) to a 2-1/2 week low is bullish for energy prices. Crude also has carryover support from Sunday when OPEC+ agreed to push back its December production increase by one month. In addition, ongoing hostilities in the Middle East tensions are supporting crude due to concern that Iran is planning a counterattack on Israel.
Today's' better-than-expected economic news from the US and China, the world's two largest crude consumers, is bullish for crude. The US Oct ISM services index unexpectedly rose +1.1 to 56.0, stronger than expectations of a decline to 53.8 and the strongest pace of expansion in 2-1/4 years. Also, the China Oct Caixin services PMI rose +1.7 to 52.0, which was stronger than the expectations of 50.5.
Crude has support from Sunday when OPEC+ said that it would delay its 180,000 bpd crude production increase by a month; the second straight month it postponed the anticipated supply increase. OPEC's Oct crude production rose +370,000 bpd to 26.9 million bpd.
Bellicose comments from Iran on Monday were bullish for crude when Iranian supreme leader Ayatollah Ali Khamenei warned of a "crushing response" to Israel's recent air strikes on Iran. Also, a report by the Wall Street Journal Sunday said that Iran is planning a counterattack on Israel involving more powerful warheads and other weapons. An escalation of hostilities between Iran and Israel could widen the conflict in the Middle East and disrupt the region's crude supplies.
Strength in the crude crack spread supports crude prices as the crack spread Tuwaday climbed to a 3-week high, 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 oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -8.2% w/w to 51.44 million bbl in the week ended November 1.
Crude demand in China has weakened and is a bearish factor for 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.
A decline in Russian crude exports is bullish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -530,000 bpd to 3.02 million bpd in the week to November 3, a 6-week low. However, Russia's Energy Ministry reported on October 23 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+.
The consensus is that Wednesday's weekly EIA crude inventories will fall by -100,000 bbl, and gasoline supplies will fall by -500,000 bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of October 25 were -4.2% below the seasonal 5-year average, (2) gasoline inventories were -3.5% below the seasonal 5-year average, and (3) distillate inventories were -8.8% below the 5-year seasonal average. US crude oil production in the week ending October 25 was unchanged w/w at a record 13.5 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending November 1 fell by -1 rig to 479 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.
