December WTI crude oil (CLZ23) this morning is up +1.70 (+2.12%), and Dec RBOB gasoline (RBZ23) is up +0.0383 (+1.77%).
Crude oil and gasoline prices this morning are moderately higher. Today's strength in U.S. equity markets shows optimism in the economic outlook and supports crude demand and prices. Also, dovish central bank comments today that support a pause in interest rate hikes are positive for crude. A stronger dollar today limits gains in crude along with the bigger-than-expected decline in the University of Michigan U.S. Nov consumer sentiment index to a 6-month low.
Increased crude consumption in India, the world's third largest crude consumer, is bullish for oil prices after India's oil product consumption in Oct rose +3.7% y/y to 19.3 MMT, the highest five months.
Dovish central bank comments today are supportive of economic growth and energy demand. Atlanta Fed President Bostic suggests he favors pausing Fed rate hikes when he said, "I think we will get to our 2% target without us having to do anything more." Also, comments from ECB President Lagarde suggest she favors pausing ECB rate hikes when she said that keeping the deposit rate at its current 4% should be enough to tame inflation.
Today's global economic news was mixed for energy demand and crude prices. On the positive side, UK Q3 GDP was unch q/q and +0.6% y/y, stronger than expectations of -0.1% q/q and +0.5% y/y. Conversely, the University of Michigan U.S. Nov consumer sentiment index fell -3.4 to a 6-month low of 60.4, weaker than expectations of 63.7.
Sunday's comments from leaders of Saudi Arabia and Russia were supportive of crude oil prices as they said they would stick with their oil production cuts of more than 1 million bpd until the end of the year. The full 23-nation OPEC+ coalition will hold a ministerial meeting on Nov 26 to review its crude production policy for 2024.
An increase in Russian crude exports is bearish for oil prices. Tanker-tracking data monitored by Bloomberg shows 3.48 million bpd of crude was shipped from Russian ports in the four weeks to Nov 5, near the highest in four months.
In a bearish factor for crude oil, the U.S. on Oct 18 said it would ease sanctions for six months on Venezuela's oil exports in exchange for steps to ensure the country holds fair presidential elections next year. An easing of sanctions would put additional crude supplies on the global market, with some analysts estimating about 200,000 bpd of additional supplies.
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. OPEC Oct crude production was little changed, rising +50,000 bpd to 28.08 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 -6.7% w/w to 74.10 million bbl as of Nov 3.
Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Oct 27 were -5.2% below the seasonal 5-year average, (2) gasoline inventories were +2.1% above the seasonal 5-year average, and (3) distillate inventories were -12.2% below the 5-year seasonal average. U.S. crude oil production in the week ended Oct 27 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 Nov 3 fell by -8 rigs to 496 rigs, posting a new 1-3/4 year low. The number of U.S. oil rigs has fallen this year after moving sharply higher during 2021-22 from the 18-year pandemic low of 172 rigs posted in Aug 2020 to a 3-1/2 year high of 627 rigs 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.
