May WTI crude oil (CLK24) on Monday closed down -0.29 (-0.35%), and May RBOB gasoline (RBK24) closed down -2.49 (-0.92%).
Crude and gasoline prices on Monday posted moderate losses, with gasoline falling to a 6-week low. The main bearish factor for crude prices Monday was an easing of Israel-Iran tensions after it appeared that Iran would not respond following Israel’s retaliatory strike last Friday.
In addition, the outlook for increased US crude production is bearish for prices after last Friday's weekly report from Baker Hughes showed that active US oil rigs in the week ended April 19 rose by +5 rigs to a 7-month high of 511 rigs.
The weakness in the crude crack spread is bearish for oil prices as the crack spread on Monday fell to a 2-month low. The weaker crack spread discourages refiners from purchasing crude and refining it into gasoline and distillates.
Reduced crude demand in India, the world's third-largest crude consumer, is negative for oil prices after India's March oil demand fell -0.6% y/y to 21.09 MMT.
Crude has support from the recent Ukrainian drone attacks on Russian refineries that damaged several Russian oil processing facilities, limiting Russia's fuel exporting capacity. Russia's fuel exports in the week to April 7 fell by -450,000 bpd from the prior week to 3.39 million bpd. JPMorgan Chase said it sees 900,000 bpd of Russian refinery capacity that could be offline "for several weeks if not months" from the attacks, adding $4 a barrel of risk premium to oil prices.
Crude prices have support from April 3 when OPEC+, at its monthly meeting, did not recommend any changes to their existing crude output cuts, which kept about 2 million bpd of production cuts in place until the end of June. However, OPEC crude production in March rose +10,000 bpd to 26.860 million bpd, a bearish factor for oil prices as Iraq and UAE continue to pump above their production quotas.
A decrease 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 -18% w/w to 75.45 million bbl as of April 19.
Crude prices have underlying support from the Israel-Hamas war and concern that the war might spread to Hezbollah in Lebanon. Also, 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.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of April 12 were -1.3% below the seasonal 5-year average, (2) gasoline inventories were -3.7% below the seasonal 5-year average, and (3) distillate inventories were -7.4% below the 5-year seasonal average. US crude oil production in the week ending April 12 was unchanged w/w at 13.1 million bpd, below the recent record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ended April 19 rose by +5 rigs to a 7-month high of 511 rigs, moderately above the 2-year low of 494 rigs posted on November 10. 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.
