January WTI crude oil (CLF25) today is down -2.13 (-2.99%), and January RBOB gasoline (RBF25) is down -0.0650 (-3.23%).
Crude oil and gasoline prices today are sharply lower as geopolitical tensions ease in the Middle East amid reports Israel and Hezbollah are close to a cease-fire. Crude price sank today despite a weaker dollar and a rally in the S&P 500 to a new record high, which signals confidence in the economic outlook and energy demand.
Crude oil prices slumped today after the Israeli ambassador to the US said a cease-fire agreement between his country and Hezbollah could happen "within days." An easing of Middle East tensions is bearish for crude as it will reduce the chance of disruption to crude supplies from the region.
Weakness in the crude crack spread is bearish for oil prices. Today's crack spread fell to a 3-1/2 week low, discouraging refiners from purchasing crude and refining it into gasoline or distillates.
An increase in crude oil held worldwide on tankers is bearish for oil prices. Vortexa reported today that crude oil stored on tankers that have been stationary for at least seven days rose by +34% w/w to 74.83 million bbl in the week ended November 22.
Escalation of the Ukraine-Russian war is supportive of crude prices. Russia launched a new hypersonic missile into the city of Dnipro last week, following Ukraine's expanded use of Western-provided long-range missiles. Also, Ukraine fired British cruise missiles at military targets inside Russia for the first time after the UK government approved the action in response to Russia deploying North Korean troops in the Ukraine war. Also last week, Ukraine carried out its first missile strikes on a border region in Russia using US-supplied missiles, which prompted Russian President Putin to approve an updated nuclear doctrine that expands the conditions for Russia to use atomic weapons, including in response to a conventional attack on its soil.
Crude demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's Oct apparent oil demand fell -5.4% y/y to 14.07 million bpd, and Jan-Oct apparent oil demand was down -4.03% y/y to 14.00 million bpd. China is the world's second-largest crude consumer.
A decline in Russian crude exports is bullish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -740,000 bpd to a 4-month low of 2.83 million bpd in the week to November 17. Separately, Russia's Energy Ministry reported on October 23 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+.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of November 15 were -4.5% below the seasonal 5-year average, (2) gasoline inventories were -4.0% below the seasonal 5-year average, and (3) distillate inventories were -4.5% below the 5-year seasonal average. US crude oil production in the week ending November 8 fell -0.7% w/w to 13.4 million bpd, falling back from the record 13.5 million bpd in the prior week.
Baker Hughes reported last Friday that active US oil rigs in the week ending November 22 rose +1 rig to 479 rigs, just above the 2-3/4 year low of 477 rigs posted in the week ending July 19. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
