Oct WTI crude oil (CLV24) Thursday closed down -0.05 (-0.07%), and Oct RBOB gasoline (RBV24) closed down -3.60 (-1.84%).
Crude oil and gasoline prices settled lower on Thursday, with crude posting an 8-3/4 month nearest-futures low and gasoline falling to a 2-3/4 year nearest-futures low. Energy demand concerns undercut crude prices after Thursday's US Aug ADP employment report showed employers added the fewest jobs in 3-1/2 years. Losses in crude were limited due to a weak dollar. Also, short-covering emerged in crude Thursday after OPEC+ agreed to pause its planned crude production increase for two months. In addition, crude found support Thursday after weekly EIA crude inventories fell more than expected to an 11-month low.
Thursday's global economic news was mixed for energy demand and crude prices. On the negative side, the US Aug ADP employment change rose +99,000, weaker than expectations of +145,000 and the smallest increase in 3-1/2 years. Also, Eurozone Jul retail sales rose +0.1% m/m, weaker than expectations of +0.2% m/m. On the positive side, the US Aug ISM services index unexpectedly rose +0.1 to 51.5, stronger than expectations of no change at 51.4. Also, German Jul factory orders unexpectedly rose +2.9% m/m, stronger than expectations of a -1.7% m/m decline.
Crude prices found support Thursday after OPEC+ agreed to pause its scheduled crude production hike of 180,000 bpd in October and November after crude prices tumbled to an 8-3/4 month low Wednesday amid fragile global energy demand.
Crude oil prices also have negative carryover from Tuesday when Libyan central bank governor Sadiq Al-Kibir said there are "strong" indications that political factions are nearing an agreement to overcome political differences and resume the country's crude oil production. Last week, 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. The halt to Libya's crude exports threatened to remove more than 1 million bpd of crude from the global market.
Oil prices have some support from concern that an escalation of conflict in the Middle East could disrupt oil supplies. Israel's military continues to conduct operations in Gaza, and there is the continued risk that the war might spread to Hezbollah in Lebanon or even to a direct conflict with Iran. Meanwhile, ongoing attacks on commercial shipping in the Red Sea by Iran-backed Houthi rebels have forced shippers to divert shipments around the southern tip of Africa instead of going through the Red Sea, disrupting global crude oil supplies.
A supportive factor for crude is a decrease in Russian crude exports. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by +-25,000 bpd to 3.1 million bpd in the week to September 1. Meanwhile, increased Russian crude production is negative for oil prices after Russia's Energy Ministry reported on August 23 that Russia's July crude production was 9.045 million bpd, about 67,000 bpd above the output target it agreed to with OPEC+.
A decline 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 fell by -14% w/w to 52.99 million bbl in the week ended August 30, the lowest in 4-1/2 years.
On June 2, OPEC pledged to extend its crude production cap at about 39 million bpd to the end of 2025. Also, the UAE was given a 300,000 bpd boost to its production target for 2025. In August, OPEC crude production fell -70,000 bpd to 27.06 million bpd.
Thursday's weekly EIA inventory report was mixed for crude and products. On the bullish side, EIA crude inventories fell -6.87 million bbl to an 11-month low, a larger draw than expectations of -300,000 bbl. Also, EIA distillate supplies unexpectedly fell -371,000 versus expectations of a +410,000 bbl build. In addition, crude stockpiles at Cushing, the delivery point of WTI futures, fell -1.12 million bbl to a 9-1/2 month low. On the bearish side, EIA gasoline inventories unexpectedly rose +848,000 bbl versus expectations for a -1.1 million bbl draw.
Thursday's EIA report showed that (1) US crude oil inventories as of August 30 were -4.5% below the seasonal 5-year average, (2) gasoline inventories were -2.2% below the seasonal 5-year average, and (3) distillate inventories were -9.5% below the 5-year seasonal average. US crude oil production in the week ending August 30 was unchanged w/w at 13.3 million bpd, falling back from 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 August 30 were unchanged at 483 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.
