December WTI crude oil (CLZ24) Monday closed down -2.34 (-3.32%), and December RBOB gasoline (RBZ24) closed down -0.0555 (-2.76%).
Crude oil and gasoline prices fell sharply on Monday, with crude posting a 1-1/2 week low and gasoline posting a 1-week low. Monday's rally in the dollar index (DXY00) to a 4-1/4 month high was bearish for energy prices. Also, concerns that Chinese energy demand will remain stagnant due to a struggling economy weighed on crude prices after Chinese consumer and producer prices for October showed weakness. In addition, crude oil prices are undercut by speculation that President-elect Trump's policies will increase US crude production and that new tariffs may slow China's economy.
Weaker-than-expected Chinese consumer and producer prices signal weakness in China's economy, which is bearish for energy demand and crude prices. China's Oct CPI rose +0.3% y/y, weaker than expected at +0.4% y/y. Also, Oct PPI fell -2.9% y/y, weaker than expectations of -2.5% y/y, and the steepest decline in 11 months. Crude demand in China has weakened and is a bearish factor for oil prices. According to Chinese customs data, China Oct crude imports fell -2% m/m and -9% y/y to 44.7 MMT, and crude imports year-to-date are down -3.4% y/y at 457.074 MMT. China is the world's second-largest crude consumer.
Concerns that Middle East hostilities could escalate are bullish for crude when Iranian supreme leader Ayatollah Ali Khamenei warned of a "crushing response" to Israel's recent air strikes on Iran. An escalation of hostilities between Iran and Israel could widen the conflict in the Middle East and disrupt the region's crude supplies.
A decline in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -0.4% w/w to 61.78 million bbl in the week ended November 8.
A decline in Russian crude exports is bullish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -530,000 bpd to 3.02 million bpd in the week to November 3, a 6-week low. 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 1 were -4.6% below the seasonal 5-year average, (2) gasoline inventories were -2.4% below the seasonal 5-year average, and (3) distillate inventories were -5.9% below the 5-year seasonal average. US crude oil production in the week ending November 1 was unchanged w/w at a record 13.5 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending November 8 were unchanged at 479 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.
