September WTI crude oil (CLU23) this morning is down -0.23 (-0.29%), and Sep RBOB gasoline (RBU23) is up +5.32 (+1.89%).
Crude oil and gasoline prices this morning are mixed. Crude prices are modestly lower after weekly EIA crude inventories fell less than expected. Also, the Fed's expected 25 bp rate hike at today's FOMC meeting may slow the economy and negatively affect energy demand and crude prices. Weakness in the dollar today is supportive of energy prices.
Crude prices have support on signs China will implement policies to revive economic growth. This week’s Politburo meeting laid out a pre-growth tone that was more dovish than markets expected. The ruling Communist Party’s 24-member Politburo, China’s top decision-making body led by President Xi Jinping, promised “counter-cyclical” policies, which imply an easing bias.
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.
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 July 16 dropped to a 6-month low of 3.1 million bpd.
In a supportive factor for oil prices, Saudi Arabia earlier this month 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 voluntarily pledged to cut 500,000 bpd of crude output in August. 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 -2.2% w/w to 106.95 million bbl as of July 21.
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.
Today's weekly EIA report was mostly bearish for crude and products. On the bearish side, EIA crude inventories fell -600,000 bbl, a smaller draw than expectations of -2.25 million bbl. Also, EIA gasoline supplies fell -786,000 bbl, less than expectations of -1.37 million bbl. In addition, EIA distillate stockpiles fell by -245,000 bbl, less than expectations of -415,000 bbl. On the positive side, crude supplies at Cushing, the delivery point of WTI futures, fell 2.61 million bbl.
Today's EIA report showed that (1) U.S. crude oil inventories as of July 21 were +1.6% above the seasonal 5-year average, (2) gasoline inventories were -7.4% below the seasonal 5-year average, and (3) distillate inventories were -14.4% below the 5-year seasonal average. U.S. crude oil production in the week ended July 21 fell -0.8% w/w to 12.2 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 21 fell by -7 rigs to a 16-month low of 530 rigs. That is well below the 3-1/4 year high of 627 rigs posted on December 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.
