November WTI crude oil (CLX23) on Friday closed down -0.92 (-1.00%), and Nov RBOB gasoline (RBX23) closed down -6.67 (-2.70%).
Nov WTI crude oil and gasoline prices Friday retreated, with gasoline tumbling to a 4-1/2 month low. Crude prices were under pressure after Friday’s weaker-than-expected global economic news sparked concerns that a slowdown in the global economy will undercut energy demand. A weaker dollar Friday limited losses in crude. Also, tight global crude supplies are a bullish factor for prices.
Friday's global economic news was mostly weaker than expected and bearish for energy demand and crude prices. U.S. Aug personal spending rose +0.4% m/m, weaker than expectations of +0.5% m/m. Also, the U.S. Sep MNI Chicago PMI fell -4.6 to 44.1, weaker than expectations of 47.6. In addition, German Aug retail sales unexpectedly fell -1.2 % m/m, weaker than expectation of an increase of +0.5% m/m and the biggest decline in 8 months. Finally, Japan Sep consumer confidence index fell -1.0 to a 6-month low of 35.2, weaker than expectations of no change at 36.2.
The outlook for tighter global fuel supplies is supportive for crude. Last Thursday, Russia said it would ban gasoline and diesel exports in an attempt to stabilize domestic fuel prices. The ban will take out about 1 million bpd of fuel supplies, or about 3.4% of total global demand according to Vortexa data, and will squeeze supplies further in an already tight global energy market.
The tightness in the oil market is expected to continue due to the extension of OPEC+ production cuts. Saudi Arabia recently said it would maintain its unilateral crude production cut of 1.0 million bpd through December. The move will hold Saudi Arabia's crude output at about 9 million bpd, the lowest level in three years. Russia also recently announced that it would maintain its 300,000 bpd cut in crude production through December. Russian crude oil shipments in August dropped to 2.28 million bpd, down -9% m/m and the lowest daily average in eleven months.
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 95.93 million bbl as of Sep 22.
The U.S. and Iran last Monday announced a prisoner exchange and the unlocking of $6 billion of Iranian funds. Improved U.S.-Iran relations could result in the eventual resumption of nuclear talks, with any deal leading to relaxed Iran sanctions and increased Iranian oil exports. According to TankerTrackers.com, Iranian crude exports rose to a 5-year high of 2.2 million bpd during the first 20 days of August, with most of the crude going to China.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Sep 22 were -3.4% below the seasonal 5-year average, (2) gasoline inventories were -2.2% below the seasonal 5-year average, and (3) distillate inventories were -13.2% below the 5-year seasonal average. U.S. crude oil production in the week ended Sep 22 was unchanged w/w at 12.9 million bpd, the most in 3-1/2 years. U.S. crude oil production is modestly 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 Sep 29 fell -5 to a 19-3/4 month low of 502 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 have roughly tripled from 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.
