September WTI crude oil (CLU23) this morning is up +0.89 (+1.18%), and Sep RBOB gasoline (RBU23) is up +4.87 (+1.81%).
Crude oil and gasoline prices this morning are moderately higher, with gasoline posting to a 3-month nearest-futures high. Crude prices are underpinned by the outlook for tighter crude supplies after news this week showed Russia's crude shipments fell to a 6-month low. Crude also found support on hopes that China will implement policies that revive economic growth and energy demand. Limiting gains in energy prices is today's rally in the dollar index to a 1-week high.
An easing of UK recession concerns is supportive for energy demand and crude prices after today's news that UK Jun retail sales ex-auto fuel rose +0.8% m/m, stronger than expectations of +0.2% m/m.
A bullish factor for crude oil is a decline in Russian crude shipments. Vessel-tracking data monitored by Bloomberg showed Russian crude oil shipments in the four weeks to July 16 dropped to a 6-month low of 3.1 million bpd.
Crude prices have support from signs China will implement policies to revive economic growth. On Wednesday, the Communist Party and the government issued a rare joint statement that included 31 measures to improve business conditions, including pledges to treat private companies the same as state-owned enterprises and consult more with entrepreneurs before drafting policies.
In a supportive factor for oil prices, Saudi Arabia earlier this month said it would extend its unilateral 1 million bpd production cut through August, keeping Saudi Arabia's crude output at about 9 million bpd, the lowest level in several years. Also, Russia voluntarily pledged to cut 500,000 bpd of crude output in August. However, Russia has yet to implement its pledged crude production cuts fully. Russian crude production cuts totaled 350,000 bpd in June, below the 500,000 bpd of cuts it said it would implement in March. Meanwhile, OPEC crude production in June rose +80,000 bpd to 28.57 million bpd.
A decline in crude in floating storage is bullish for prices. Monday's weekly data from Vortexa shows the amount of crude oil held worldwide on tankers that have been stationary for at least a week fell -21% w/w to 94.60 million bbl as of July 14.
An improvement in Chinese crude demand is bullish for prices after government trade data showed China's June crude imports rose +4.6% m/m to 12.72 million bpd, the most in three years.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of July 14 were +1.1% above the seasonal 5-year average, (2) gasoline inventories were -7.6% below the seasonal 5-year average, and (3) distillate inventories were -14.3% below the 5-year seasonal average. U.S. crude oil production in the week ended July 14 was unchanged w/w at 12.3 million bpd. U.S. crude oil production is well 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 July 14 fell by -3 rigs to a 15-month low of 537 rigs. That is well below the 3-1/4 year high of 627 rigs posted on December 2, 2022. U.S. active oil rigs have more than tripled from the 18-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.
