September WTI crude oil (CLU23) on Friday closed up +0.37 (+0.45%), and Sep RBOB gasoline (RBU23) closed up +6.02 (+2.07%).
Crude oil and gasoline prices Friday posted moderate gains. Crude prices rose Friday after a monthly report from the International Energy Agency (IEA) said global oil demand has surged to a record and that crude prices may move even higher. Crude prices fell back from their best levels Friday when the dollar index (DXY00) climbed to a 5-week high.
Crude found support in Friday's monthly report from the IEA that said global crude oil usage averaged a record 103 million bpd in June and may soar even higher this month. The IEA also said global crude supplies have tightened, leaving oil inventories in developed nations about 115 million bpd below their five-year average.
Strength in the crude crack spread supports crude prices after the crack spread Friday rose to a 9-1/2 month high. Strength in the crack spread encourages refiners to purchase crude oil and refine it into gasoline and distillates.
JPMorgan Chase said Friday that it sees key oil market gauges "pointing to a rapidly tightening physical market and that prices will continue to climb toward $90 a barrel, or even above, by September."
A negative factor for crude was Friday's Chinese economic news that showed a slowdown in credit growth, signaling weakness in the economy after Jul new yuan loans rose +345.9 billion yuan, weaker than expectations of 780.0 billion yuan and the smallest amount of loans in nearly 14 years.
In a bearish factor, China's July crude imports fell -19% m/m to 10.33 million bpd, the smallest volume in 6 months. Also, Vortexa said China's onshore crude inventories have expanded to a record 1.02 billion bbl.
A decline in crude demand in India, the world's third-biggest crude consumer, is bearish for oil prices. India's Jun crude oil imports fell -1.3% y/y to 19.7 MMT, the lowest in 7 months.
Crude has support on Tuesday's comments from Ukraine President Zelensky, who said his country would retaliate against Russian ships in the Black Sea if Russia continued to block Ukrainian ports. Ukrainian drones on Sunday attacked a Russian oil tanker in the Black Sea, a route that accounts for 20% of the oil that Russia sells daily on global markets.
Crude prices have carryover support from last Thursday when Saudi Arabia and Russia said they would extend their crude production cuts. Saudi Arabia on Thursday said it will extend its 1 million bpd cut in crude production into September and said its crude output may "be extended, or extended and deepened." The cut in Saudi production keeps its crude output at about 9 million bpd, the lowest level in several years. Meanwhile, Russian Deputy Prime Minister Novak said Russia "will continue to voluntarily reduce its oil supply in September by 300,000 bpd" to balance the market. Russia cut its crude output by 500,000 bpd in August.
OPEC crude production in July fell -900,000 bpd to a 1-3/4 year low of 27.79 million bpd.
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 Aug 6 dropped to 3.02 million bpd, about 870,000 bpd below the peak in mid-May.
A decline in crude 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 -4.6% w/w to 103.05 million bbl as of Aug 4.
Wednesday's weekly EIA report showed that (1) U.S. crude oil inventories as of Aug 4 were -0.4% below the seasonal 5-year average, (2) gasoline inventories were -7.2% below the seasonal 5-year average, and (3) distillate inventories were -16.7% below the 5-year seasonal average. U.S. crude oil production in the week ended Aug 4 jumped +3.3% w/w to 12.6 million bpd, the most in over three years. U.S. crude oil production is moderately below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported Friday that active U.S. oil rigs in the week ended Aug 11 were unchanged at a 17-month low of 525 rigs. That is well below the 3-1/4 year high of 627 rigs posted on Dec 2, 2022. Still, U.S. active oil rigs are more than triple the 18-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity from pandemic lows.
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.
