January WTI crude oil (CLF25) Thursday closed down -0.27 (-0.38%), and January RBOB gasoline (RBF25) closed up +0.0027 (+0.14%).
Crude oil and gasoline prices Thursday fell back from 2-1/2 week highs and settled mixed. Thursday's rally in the dollar index (DXY00) to a 2-week high weighed on energy prices. Also, Thursday's monthly report from the International Energy Agency (IEA) was bearish for crude as the IEA projects a global oil glut next year.
Crude price retreated Thursday after the IEA said global oil markets would be oversupplied by 1.4 million bpd if OPEC+ proceeds with plans to revive crude output starting in April, and even if OPEC+ cancels next year's production hikes entirely, there will still be a supply glut of 950,000 bpd.
Crude prices found support Thursday from a Times of Israel report that said Israel's military sees the fall of Syria's regime as an opportunity to carry out a strike on Iran, which could widen the conflict in the Middle East and threaten crude supplies from the region.
Thursday's global economic news was negative for energy demand and crude prices. US weekly initial unemployment claims unexpectedly rose +17,000 to an 8-week high of 242,000, showing a weaker labor market than expectations of a decline to 220,000. Also, the ECB cut its 2024 Eurozone GDP forecast to 0.7% from a prior forecast of 0.8%.
Crude has support from Wednesday when Bloomberg reported the Biden administration is considering new, harsher sanctions on Russian crude oil, which could tighten the global oil market.
Oil prices are seeing support from the promise of additional stimulus measures in China. The Chinese Politburo, the ruling Communist Party’s most senior 24 officials led by President Xi Jinping, announced on Monday that it would embrace a "moderately loose" strategy for monetary policy next year and vowed to be "more proactive" on fiscal policy, a sign of further easing ahead.
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 -12% w/w to 62.74 million bbl in the week ended December 6.
Crude found support last Thursday after OPEC+ pushed back a planned hike of its crude production by +180,000 bpd from January to April and said it would unwind its crude output cuts at a slower pace than planned. Also, the United Arab Emirates (UAE) said it will delay the planned 300,000 bpd increase in its crude production target from January to April. OPEC+ had previously agreed to restore 2.2 million bpd of output in monthly installments between January and late 2025. However, that is now pushed back until September 2026. OPEC Nov crude production rose +120,000 bpd to 27.02 million bpd.
Escalation of the Ukraine-Russian war is supportive of crude prices. Russia launched a new hypersonic missile into the city of Dnipro late last month, following Ukraine's expanded use of Western-provided long-range missiles against targets inside Russia. Also, Russian President Putin warned that Russia could strike “decision-making centers” in Kyiv with ballistic missiles. Last week, Putin also approved an updated nuclear doctrine that expands the conditions for Russia to use nuclear weapons, including in response to a conventional attack on its soil.
Crude demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's Oct apparent oil demand fell -5.4% y/y to 14.07 million bpd, and Jan-Oct apparent oil demand was down -4.03% y/y to 14.00 million bpd. China is the world's second-largest crude consumer.
An increase in Russian crude exports is bearish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +570,000 bpd to 3.36 million bpd in the week to December 1.
Wednesday's EIA report showed that (1) US crude oil inventories as of December 6 were -6.2% below the seasonal 5-year average, (2) gasoline inventories were -3.6% below the seasonal 5-year average, and (3) distillate inventories were -4.5% below the 5-year seasonal average. US crude oil production in the week ending December 6 rose +0.9% w/w to a record 13.631 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending December 6 rose +5 rigs to 482 rigs, rebounding from the previous week's 2-3/4 year low of 477 rigs. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
