June WTI crude oil (CLM24) this morning is up +0.45 (+0.57%), and June RBOB gasoline (RBM24) is down -2.33 (-0.92%).
Crude oil and gasoline prices this morning are mixed, with gasoline falling to a 2-month low. A stronger dollar today is negative for energy prices. Also, a rebound in Russian crude exports adds supplies to the global market and is bearish for prices. Crude recovered its losses and moved higher after the bullish weekly EIA crude inventory report.
Weakness in the crude crack spread is bearish for crude prices after the crack spread today fell to a 2-1/2 month low. The weaker crack spread discourages refiners from buying crude oil to refine into gasoline and distillates.
In a bullish factor for crude oil prices, Saudi Arabia's state-owned Aramco raised crude prices for June delivery to Asian customers by 90 cents a barrel, above the consensus of 60 cents.
Concerns about the intensification of the Hamas-Israel conflict are supportive of crude prices. Israel's military on Monday told civilians to move out of Rafah, a possible sign that Israel will soon launch military operations in the city. There is ongoing concern that the war might spread to Hezbollah in Lebanon or even to a direct conflict with Iran. Also, attacks on commercial shipping in the Red Sea by Iran-backed Houthi rebels have forced shippers to divert shipments around the southern tip of Africa instead of going through the Red Sea, disrupting global crude oil supplies.
Reduced crude oil in floating storage is bullish for prices. Monday's weekly data from Vortexa showed that the amount of crude oil held worldwide on tankers that have been stationary for at least a week fell -14% w/w to 57.76 million bbl as of May 3.
Reduced crude demand in India, the world's third-largest crude consumer, is bearish for oil prices after India's March oil demand fell -0.6% y/y to 21.09 MMT.
Crude has support from the recent Ukrainian drone attacks on Russian refineries that damaged several Russian oil processing facilities, limiting Russia's fuel exporting capacity. However, Russia's fuel exports have recovered as exports in the week to May 5 rose by about +250,000 bpd to 3.68 million bpd from 3.43 million bpd in the prior week. JPMorgan Chase said it sees 900,000 bpd of Russian refinery capacity that could be offline "for several weeks if not months" from the attacks, adding $4 a barrel of risk premium to oil prices.
Crude prices have support from April 3 when OPEC+, at its monthly meeting, did not recommend any changes to their existing crude output cuts, which kept about 2 million bpd of production cuts in place until the end of June. However, OPEC crude production in March rose +10,000 bpd to 26.860 million bpd, a bearish factor for oil prices as Iraq and UAE continue to pump above their production quotas.
Today's weekly EIA report was mixed for crude prices. On the positive side, EIA crude inventories fell -1.36 million bbl. Conversely, EIA gasoline supplies rose +915,000 bbl, and EIA distillate stockpiles rose +560,000 bbl. Also, crude supplies at Cushing, the delivery point of WTI futures, rose +1.88 million bbl to a 9-1/2 month high.
Wednesday's EIA report showed that (1) US crude oil inventories as of May 3 were -3.1% below the seasonal 5-year average, (2) gasoline inventories were -2.0% below the seasonal 5-year average, and (3) distillate inventories were -6.6% below the 5-year seasonal average. US crude oil production in the week ending May 3 was unchanged w/w at 13.1 million bpd, below the recent record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ended May 3 fell by -7 rigs to 499 rigs, modestly above the 2-year low of 494 rigs posted on November 10. 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.
