August WTI crude oil (CLQ23) on Tuesday closed up +1.60 (+2.16%), and Aug RBOB gasoline (RBQ23) closed up +6.27 (+2.38%).
Crude oil and gasoline prices Tuesday rallied sharply, with gasoline posting a 1-1/2 month nearest-futures high. The outlook for tighter crude supplies is boosting oil prices ahead of Wednesday's weekly EIA report, which is expected to show U.S. crude inventories fell -2.2 million bbl last week. Also, Tuesday's rally in the S&P 500 to a 15-month high shows confidence in the economic outlook that supports energy demand and crude prices.
Crude prices garnered support Tuesday from Alpha BBL's prediction that Wednesday's weekly EIA report for the week of July 14 will show crude supplies at Cushing, the delivery point of WTI futures, falling -3.3 million bbl.
Strength in the crude crack spread is bullish for crude prices as the crack spread Tuesday climbed to a 4-week high. The stronger crack spread encourages refiners to boost their crude purchases and refine it into gasoline and distillates.
Crude prices were under pressure Monday on news that Libya is restarting crude production at its 250,000 bpd Sharara oil field, its second-largest, after protesters left the facility following their forced shutdown last week. Crude production at the 70,000 bpd El Feel oil field has also resumed.
In a supportive factor for oil prices, Saudi Arabia week in early July said it would extend its unilateral 1 million bpd production cut through August, keeping Saudi Arabia's crude output at about 9 million bpd, the lowest level in several years. Also, Russia pledged to cut 500,000 bpd of crude output in August voluntarily. However, Russia has yet to implement its pledged crude production cuts fully. Russian crude production cuts totaled 350,000 bpd in June, below the 500,000 bpd of cuts it said it would implement in March. Meanwhile, OPEC crude production in June rose +80,000 bpd to 28.57 million bpd.
A decline in crude in floating storage is bullish for prices. Monday's weekly data from Vortexa shows the amount of crude oil held worldwide on tankers that have been stationary for at least a week fell -21% w/w to 94.60 million bbl as of July 14.
An improvement in Chinese crude demand is bullish for prices after government trade data showed China's June crude imports rose +4.6% m/m to 12.72 million bpd, the most in three years.
Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of July 7 were +0.7% above the seasonal 5-year average, (2) gasoline inventories were -7.0% below the seasonal 5-year average, and (3) distillate inventories were -13.4% below the 5-year seasonal average. U.S. crude oil production in the week ended July 7 fell -0.8% w/w to 12.3 million bpd, falling back from the prior week's 3-year high of 12.4 million bpd. U.S. crude oil production is well below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended July 14 fell by -3 rigs to a 15-month low of 537 rigs. That is well below the 3-1/4 year high of 627 rigs posted on December 2, 2022. U.S. active oil rigs have more than tripled from the 18-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
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.
