Nov WTI crude oil (CLX24) Tuesday closed up +1.66 (+2.44%), and Nov RBOB gasoline (RBX24) closed up +3.15 (+1.63%).
Crude oil and gasoline prices Tuesday rallied sharply on escalating Middle East tensions that have the potential to disrupt oil supplies. Israel began a ground assault into Lebanon, and Iran fired rockets at Israel. Crude prices fell from their best levels Tuesday after the dollar index climbed to a 1-1/2 week high.
Tuesday's global economic news was mixed for energy demand and crude prices. On the positive side, the US Aug JOLTS job openings report rose +329,000 to 8.04 million, showing a stronger labor market than expectations of 7.693 million. Also, the Eurozone Sep S&P manufacturing PMI was revised upward by +0.2 to 45.0 from the previously reported 44.8. In addition, the Japan Q3 Tankan large manufacturing business conditions index was unchanged at 13 from Q2, stronger than expectations of a decline to 12. On the bearish side, the US Sep ISM manufacturing index was unchanged from Aug at 47.2, weaker than expectations of an increase to 47.5. Also, US Aug construction spending unexpectedly fell -0.1% m/m, weaker than expectations of +0.2% m/m.
A bearish factor for crude oil was Monday's report from Bloomberg, which said Libyan oil fields halted or curtailed by an eastern government ban are expected to restore crude output today. Earlier this month, Libya's eastern government declared force majeure on all oil fields, terminals, and crude export facilities as it called for a halt to all crude production and exports due to political conflict over who controls the country's central bank and oil revenues.
Crude prices were undercut by last Thursday's report from the Financial Times that said 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.
An increase in crude oil held worldwide on tankers is bullish for prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +1% w/w to 60.76 million bbl in the week ended September 27.
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.
An increase in Russian crude exports is bearish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +850,000 bpd to 3.74 million bpd in the week to September 29, a 3-month high. Also, Russia's Energy Ministry reported last Tuesday that Russia's Aug crude production was 9.059 million bpd, down -30,000 bpd from July but +81,000 bpd above the output target it agreed to with OPEC+.
The consensus is for Wednesday's weekly EIA crude inventories to fall by -1.43 million bbl and gasoline supplies to climb by +200,000 bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of September 20 were -5.0% below the seasonal 5-year average, (2) gasoline inventories were -1.0% below the seasonal 5-year average, and (3) distillate inventories were -8.7% below the 5-year seasonal average. US crude oil production in the week ending September 20 was unchanged w/w at 13.2 million bpd, just below the record high of 13.4 million bpd from the week of August 16.
Baker Hughes reported last Friday that active US oil rigs in the week ending September 27 fell -4 rigs to 484 rigs, modestly 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.
