Nov WTI crude oil (CLX24) Wednesday closed down -1.87 (-2.61%), and Nov RBOB gasoline (RBX24) closed down -3.13 (-1.56%).
Crude oil and gasoline prices settled sharply lower on Wednesday. A stronger dollar Wednesday weighed on energy prices. Oil prices were also weighed down by concern that Chinese fuel demand will remain stagnant despite government actions to boost stimulus measures. Losses in crude accelerated Wednesday after Libyan factions agreed to nominate a new interim central bank governor, an initial step that could eventually help the country to resume its shuttered oil production. Crude prices retreated Wednesday despite a bullish EIA inventory report.
Crude exports from Libya have recently risen, and the outlook for higher exports will boost global supplies and is negative for prices. Tanker-tracking data compiled by Bloomberg showed Libya's crude shipments averaged 719,000 bpd between September 13-19, more than double the 314,000 bpd in the previous seven days. Earlier this month, Libya's eastern government declared force majeure on all oil fields, terminals, and crude export facilities as it called for a halt to all crude production and exports due to political conflict over who controls the country's central bank and oil revenues.
Concerns that conflict in the Middle East may widen and disrupt the region's crude supplies are bullish for crude. Iranian-backed Hezbollah launched a barrage of rockets, missiles, and drones toward northern Israel on Sunday, and Israeli counterattacks in Lebanon on Monday and Tuesday killed more than 500 people, raising fears about a broader conflict that could involve Iran, a major oil producer.
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 -12% w/w to 56.31 million bbl in the week ended September 20, the lowest amount in 4-1/2 years.
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.
A decline in Russian crude exports is positive for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -390,000 bpd to 2.89 million bpd in the week to September 22. Also, a decline in Russian crude production is positive for oil prices after Russia's Energy Ministry reported last Tuesday that Russia's Aug crude production was 9.059 million bpd, down -30,000 bpd from July but +81,000 bpd above the output target it agreed to with OPEC+.
Wednesday's weekly EIA report was mostly bullish for crude oil and products. EIA crude inventories fell -4.47 million bbl to a 2-1/2 year low, a larger draw than expectations of -1.43 million bbl. Also, EIA gasoline supplies unexpectedly fell -1.5 million bbl versus expectations of a +200,000 bbl build. In addition, EIA distillate stockpiles fell -2.2 million bbl, a larger draw than expectations of -1.2 million bbl. On the negative side, crude supplies at Cushing, the delivery point of WTI futures, rose +116,000 bbl.
Wednesday's EIA report showed that (1) US crude oil inventories as of September 20 were -5.0% below the seasonal 5-year average, (2) gasoline inventories were -1.0% below the seasonal 5-year average, and (3) distillate inventories were -8.7% below the 5-year seasonal average. US crude oil production in the week ending September 20 was unchanged w/w at 13.2 million bpd, just below the record high of 13.4 million bpd from the week of August 16.
Baker Hughes reported last Friday that active US oil rigs in the week ending September 20 were unchanged at 488 rigs, modestly 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.
