November WTI crude oil (CLX23) this morning is up +1.27 (+1.47%), and Nov RBOB gasoline (RBX23) is up +4.61 (+2.02%).
Nov WTI crude oil and gasoline prices this morning rallied to 2-week highs and are moderately higher. Concerns about an escalation of the Israeli-Hamas conflict that could disrupt Middle East oil supplies are boosting prices today. Crude price maintained their gains on a bullish EIA report that showed crude supplies at Cushing dropped to a 9-year low. A stronger dollar today is negative for energy prices.
Heightened risks of an escalation in the Israeli-Hamas war boosted crude prices today after an explosion at a Gaza hospital complicated diplomatic efforts to contain the conflict. After the bombing, the leaders of Jordan, Egypt, and the Palestinian Authority canceled their scheduled summits with President Biden, who landed in Israel today. Also, Iran’s foreign minister called for an oil embargo against Israel.
Comments Monday from Iranian Foreign Minister Hossein Amirabdollahian were bullish for crude prices when he said, "Time for political solutions is running out, and the possible expansion of the war to other fronts is approaching the inevitable stage." Iran’s foreign minister has said that Hezbollah militants could open a new front in the Israeli war if the blockade of Gaza and attacks on civilians continue.
A bearish factor for crude oil was Monday's report in the Washington Post that said the U.S. will ease sanctions on Venezuela's oil exports in exchange for steps to ensure the country holds fair presidential elections next year. An easing of sanctions could put additional crude supplies on the global market.
The tightness in the oil market is expected to continue due to the extension of OPEC+ production cuts. Saudi Arabia recently said it would maintain its unilateral crude production cut of 1.0 million bpd through December. The move will hold Saudi Arabia's crude output at about 9 million bpd, the lowest level in three years. Russia also recently announced that it would maintain its 300,000 bpd cut in crude production through December. Saudi Arabia and Russia on Wednesday announced that they will retain their crude production cuts until the end of the year. OPEC Sep crude production was little changed, rising +50,000 bpd to 27.97 million bpd.
A decline in crude in floating storage is bullish for prices. Monday's weekly data from Vortexa showed that the amount of crude oil held worldwide on tankers that have been stationary for at least a week fell -0.5% w/w to 74.71 million bbl as of Oct 13, the lowest in 10 months.
Today's weekly EIA report is bullish for crude prices. EIA crude inventories fell -4.49 million bbl, a larger draw than expectations of -550,000 bbl. Also, EIA gasoline supplies fell -2.37 million bbl, a larger draw than expectations of -100,000 bbl. In addition, EIA distillate stockpiles fell -3.19 million bbl, a larger draw than expectations of -1.0 million bbl. Finally, crude supplies at Cushing, the delivery point of WTI futures, fell -758,000 bbl to a nearly 9-year low.
Today's EIA report showed that (1) U.S. crude oil inventories as of Oct 13 were -4.8% below the seasonal 5-year average, (2) gasoline inventories were -0.1% below the seasonal 5-year average, and (3) distillate inventories were -13.3% below the 5-year seasonal average. U.S. crude oil production in the week ended Oct 13 was unchanged w/w at a record high of 13.2 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended Oct 13 rose by +4 to 501 rigs, recovering slightly from the prior week's 20-month low of 497 rigs. That is well below the 3-1/4 year high of 627 rigs posted on Dec 2, 2022. Still, U.S. active oil rigs have roughly tripled from 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.
