December WTI crude oil (CLZ24) Wednesday closed up +1.40 (+2.08%), and December RBOB gasoline (RBZ24) closed up +0.0411 (+2.14%).
Dec crude oil prices Wednesday rallied on a weaker dollar. Also, lingering Middle East tensions are bullish for crude after Israel vowed to strike Iran "very hard" should it launch another attack on Israel. Crude also rose Wednesday on a Reuters report that said OPEC+ could delay a planned hike in oil production. Crude prices added their gains Wednesday after weekly EIA crude and gasoline inventories unexpectedly declined.
Wednesday's report from Reuters gave crude prices a boost as the report said OPEC+ could delay a planned +180,000 bpd hike in oil production scheduled to take effect in December by a month or more, citing concerns about soft global oil demand and rising supply.
Wednesday's global economic news was mixed for energy demand and crude prices. On the bullish side, the US Oct ADP employment change rose +233,000, showing a stronger labor market than expectations of +111,000 and the biggest increase in 15 months. Also, Eurozone Q3 GDP grew +0.4% q/q and +0.9% y/y, slightly stronger than expectations of +0.2% q/q and +0.8% y/y. On the negative side, US Q3 GDP grew +2.8% (q/q annualized), slightly weaker than expectations of +2.9%. Also, Eurozone Oct economic confidence unexpectedly fell -0.7 to a 6-month low of 95.6, weaker than expectations of an increase to 96.3.
Crude tumbled to a 3-week low Tuesday after Israel's weekend retaliatory strike was relatively limited and raised hopes that the direct attacks between Iran and Israel are over for the time being. Iran on Monday said its oil industry was operating normally in the wake of the weekend strike by Israel, which did not target Iranian oil infrastructure. Also, the risk premium in oil prices was reduced after Israel on Monday said it was open to a short truce in Gaza in return for the release of a small number of hostages.
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 -18% w/w to 55.49 million bbl in the week ended October 25.
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 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. On October 13, Libya's National Oil Corp said that Libya's crude production rose to 1.3 million bpd, the most in two months, which boosted 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. OPEC crude production in September fell -480,000 bpd to an 8-month low of 26.51 million bpd
An increase in Russian crude exports is bearish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +120,000 bpd to 3.54 million bpd in the week to October 27. However, 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 weekly EIA report was mostly bullish for crude prices. EIA crude inventories unexpectedly fell -515,000 bbl versus expectations of a +1.8 million bbl build. Also, EIA gasoline supplies unexpectedly fell -2.7 million bbl to a 23-month low versus expectations of a +600,000 bbl build. On the negative side, crude stockpiles at Cushing, the delivery point for WTI futures, rose by +681,000 bbl.
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 October 25 fell by -2 rigs to 480 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.
