May WTI crude oil (CLK24) on Thursday closed up +0.04 (+0.05%), and May RBOB gasoline (RBK24) closed down -1.50 (-0.55%).
Crude and gasoline prices on Thursday settled mixed, with crude rebounding from a 3-week low and gasoline falling to a 2-week low. A stronger dollar Thursday weighed on energy prices. Crude also has a negative carryover from Wednesday, when the EIA reported that crude inventories rose more than expected to a 10-month high. Lingering geopolitical risks between Iran and Israel are limiting the downside in crude prices.
Crude prices recovered from early losses and posted modest gains Thursday after Iran warned Israel against attacking its nuclear facilities, threatening to respond in kind if its atomic sites are targeted.
Crude oil prices are supported by Israel-Iran tensions. Top Israeli military officials said Monday that their country has no choice but to respond to Iran's weekend attack. There are hopes that any Israeli retaliation will be limited and will perhaps conclude the latest round of tensions that began with Israel striking an Iranian consulate in Syria and killing some top Iranian military generals.
Thursday's global economic news is mixed for energy demand and crude prices. On the negative side, US Mar leading indicators fell -0.3% m/m, weaker than expectations of -0.1% m/m. Also, Eurozone Mar new car registrations fell -5.2% y/y, the biggest decline in 20 months. On the positive side, the US Apr Philadelphia Fed business outlook survey unexpectedly rose +12.3 to a 2-year high of 15.5 versus expectations of a decline to 2.0. Also, the Japan Feb tertiary industry index rose +1.5% m/m, stronger than expectations of +0.5% m/m, and the largest increase in 2-1/2 years.
Weakness in the crude crack spread is bearish for crude prices. The crack spread Thursday fell to a 1-week low, discouraging refiners from purchasing crude oil and refining it into gasoline and distillates.
Reduced crude demand in India, the world's third-largest crude consumer, is negative 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. Russia's fuel exports in the week to April 7 fell by -450,000 bpd from the prior week to 3.39 million bpd. 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.
An increase in crude in floating storage is bearish 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 rose +11% w/w to 78.80 million bbl as of April 12.
Crude prices have underlying support from the Israel-Hamas war and concern that the war might spread to Hezbollah in Lebanon. 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.
Wednesday's EIA report showed that (1) US crude oil inventories as of April 12 were -1.3% below the seasonal 5-year average, (2) gasoline inventories were -3.7% below the seasonal 5-year average, and (3) distillate inventories were -7.4% below the 5-year seasonal average. US crude oil production in the week ending April 12 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 April 12 fell by -2 rigs to 506 rigs, moderately 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 3-3/4 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.
