Nov WTI crude oil (CLX24) today is up +0.08 (+0.11%), and Nov RBOB gasoline (RBX24) is up +0.20 (+0.10%).
Crude prices today are slightly higher on stronger-than-expect US economic news that supports economic growth and energy demand. Also, today's rally in the S&P 500 to a new record high shows confidence in the economic outlook that is positive for energy demand. Crude also found support on today's bullish weekly EIA report.
Crude oil and gasoline prices today gave up most of their gains after the dollar index (DXY00) rallied to a 2-1/2 month high. Also, underwhelming stimulus measures from China may keep economic growth and energy demand subdued in China, the world's second largest crude consumer.
Today's US economic news was mostly better than expected, a bullish factor for energy demand and crude prices. Sep retail sales rose +0.4% m/m, stronger than expectations of +0.3% m/m. Also, weekly initial unemployment claims unexpectedly fell -19,000 to 241,000, showing a stronger labor market than expectations of an increase to 259,000. In addition, the Oct Philadelphia Fed business outlook survey rose +8.6 to 10.3, stronger than expectations of 3.0. On the negative side, Sep manufacturing production fell -0.4% m/m, weaker than expectations of -0.1% m/m.
Comments today from ECB President Lagarde were negative for energy demand and crude prices when she said, "The risks to economic growth in the Eurozone remain tilted to the downside."
A negative factor for crude was Tuesday's report from the Washington Post that said Israeli Prime Minister Netanyahu told the Biden administration he is willing to strike military rather than oil or nuclear facilities in Iran in retaliation for Iran's missile attack on Israel on October 1.
An increase in crude oil held worldwide on tankers is bearish for prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +24% w/w to 58.58 million bbl in the week ended October 11.
A bearish factor for crude oil is ramped-up crude output in Libya after the resolution of a political standoff that had curbed the country's crude production and exports. Libya's National Oil Corp said Sunday that Libya's crude production rose to 1.3 million bpd, the most in two months, which boosts global crude supplies.
Crude prices have support from the likelihood that Israel will retaliate against Iran for its missile attack on Israel on October 1, which could further escalate hostilities in the Middle East. JPMorgan Chase said that given the low level of global oil inventories, the odds favor a sustained geopolitical premium in crude prices until the conflict between Israel and Iran is resolved.
Crude prices found support after OPEC+ on September 5 agreed to pause its scheduled crude production hike of 180,000 bpd in October and November due to recent weakness in crude prices and signs of fragile global energy demand. However, the Financial Times reported on September 26 that Saudi Arabia is ready to abandon its unofficial oil price target of $100 a barrel to regain its market share and is committed to returning its crude production as planned on December 1. OPEC crude production in September fell -480,000 bpd to an 8-month low of 26.51 million bpd
A decline in Russian crude exports is supportive of crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -60,000 bpd to 3.31 million bpd in the week to October 13. Also, Russia's Energy Ministry reported last Wednesday that Russia's Sep crude production was 8.97 million bpd, down -13,000 bpd from Aug and just below the 8.98 million bpd output target it agreed to with OPEC+.
Today's weekly EIA report was mostly supportive of crude and products. EIA crude inventories unexpectedly fell -2.19 million bbl versus expectations of a +1.5 million bbl build. Also, EIA gasoline supplies fell -2.2 million bbl to a 1-3/4 year low, a larger draw than expectations of -2.0 million bbl. In addition, EIA distillate stockpiles fell -3.5 million bl t a 10-month low, a larger draw than expectations of -2.5 million bbl. On the negative side, crude supplies at Cushing, the delivery point of WTI futures, rose +108,000 bbl. Also, US crude production in the week ended October 11 rose +0.7% w/w to a record high of 13.5 million bpd.
Today's EIA report showed that (1) US crude oil inventories as of October 11 were -4.8% below the seasonal 5-year average, (2) gasoline inventories were -3.9% below the seasonal 5-year average, and (3) distillate inventories were -9.8% below the 5-year seasonal average. US crude oil production in the week ending October 11 rose +0.7% w/w to a record 13.5 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending October 11 rose by +2 rigs to 481 rigs, just above the 2-1/2 year low of 477 rigs posted in the week ending July 19. 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.
