December WTI crude oil (CLZ24) Monday closed up +2.14 (+3.19%), and December RBOB gasoline (RBZ24) closed up +0.0690 (+3.54%).
Crude oil and gasoline prices Monday rallied sharply on mounting geopolitical tensions after the US gave Ukraine the green light to use long-range missiles inside Russia. Also, a weaker dollar on Monday was supportive of energy prices.
Rising geopolitical risks boosted crude prices Monday after the US approved Ukraine's use of long-range US-made missiles inside of Russia, which could draw the US more directly into the conflict. Also, a Bloomberg report said that North Korea may deploy as many as 100,000 troops to aid Russia’s war on Ukraine, increasing the likelihood of North Korea becoming more directly involved in the conflict.
Strength in the crude crack spread supports crude prices after the crack spread Monday rose to a 2-3/4 month 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 -14% w/w to 50.97 million bbl in the week ended November 15.
Concerns that Middle East hostilities could escalate are bullish for crude when Iranian supreme leader Ayatollah Ali Khamenei warned of a "crushing response" to Israel's recent air strikes on Iran. An escalation of hostilities between Iran and Israel could widen the conflict in the Middle East and disrupt the region's crude supplies.
Crude demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's Oct apparent oil demand fell -5.4% y/y to 14.07 million bpd, and Jan-Oct apparent oil demand was down -4.03% y/y to 14.00 million bpd. China is the world's second-largest crude consumer.
An increase in Russian crude exports is bearish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +260,000 bpd to 3.42 million bpd in the week to November 10. Separately, 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+.
Last Thursday's EIA report showed that (1) US crude oil inventories as of November 8 were -4.4% below the seasonal 5-year average, (2) gasoline inventories were -4.3% below the seasonal 5-year average, and (3) distillate inventories were -5.4% below the 5-year seasonal average. US crude oil production in the week ending November 8 fell -0.7% w/w to 13.4 million bpd, falling back from the record 13.5 million bpd in the prior week.
Baker Hughes reported last Friday that active US oil rigs in the week ending November 15 fell -1 rig to 478 rigs, just above the 2-3/4 year low of 477 rigs posted in the week ending July 19. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
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