August WTI crude oil (CLQ24) Friday closed down -0.41 (-0.50%), and Aug RBOB gasoline (RBQ24) closed down -0.25 (-0.10%).
Crude oil and gasoline prices Friday gave up an early advance and closed moderately lower. Crude prices gave up an early rally Friday and turned lower after the US July consumer sentiment index unexpectedly fell to an 8-month low, a negative factor for economic growth and energy demand. Crude prices Friday initially moved higher after the dollar index (DXY00) fell to a 5-week low. Crude also has carryover support from Wednesday when the EIA reported that weekly US crude inventories unexpectedly declined.
Crude prices also came under pressure Friday after US President Biden said that Israel and Hamas have agreed to a cease-fire framework, potentially reducing geopolitical risks to Middle Eastern crude supplies.
Thursday's monthly report from the IEA was bearish for crude as the report said global crude consumption in Q2 rose by +710,000 bpd, the smallest increase since late 2022, as Chinese crude demand slipped into a contraction.
Wednesday's report from JPMorgan Chase shows stronger global oil demand that is bullish for crude prices as the report said global oil demand averaged 103.6 million bpd in the month-to-date through July 6, rising by +1.7 million bpd from a year ago. The report cites a rebound in US and Chinese air travel and weather-related increases in fuel oil and gasoil use in the Middle East.
Reduced crude exports from Russia are limiting global oil supplies and are supportive of oil prices. According to vessel-tracking data compiled by Bloomberg, Russia's crude exports in the week to July 7 fell by -990,000 bpd to 2.67 million bpd, the lowest in over five months.
Weakness in crude demand in China, the world's second-largest crude consumer, is bearish for oil prices. Data compiled by Bloomberg shows that in the week ending June 28, only 86 global oil tankers indicated China as their next destination in the coming three months, five fewer than the prior week and the lowest weekly tally since August of 2022.
Crude oil prices have underlying support from the Hamas-Israel conflict. 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.
Higher than expected Russian crude output is bearish for oil prices. Russian crude production averaged 9.078 million bpd in June, above its agreed target of 9.049 million bpd.
An increase in crude oil in floating storage is bearish 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 rose +11% w/w to 86.58 million bbl as of July 5.
OPEC+ rolled out a plan to restore some crude production in Q4, which sparked worries about a glut in global oil supplies. On June 2, OPEC+ extended the 2 million bpd of voluntary crude production cuts into Q3 but said they would gradually phase out the cuts over the following 12 months, beginning in October. 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.
A decrease in OPEC crude output is positive for oil prices. OPEC's June crude production fell -80,000 bpd to 26.98 million bpd.
Wednesday's EIA report showed that (1) US crude oil inventories as of July 5 were -4.4% below the seasonal 5-year average, (2) gasoline inventories were -1.1% below the seasonal 5-year average, and (3) distillate inventories were -8.2% below the 5-year seasonal average. US crude oil production in the week ending July 5 rose +0.8% w/w and matched a record high of 13.3 million bpd.
Baker Hughes reported Friday that active US oil rigs in the week ending July 12 fell -1 rig to a 2-1/2 year low of 478 rigs. 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.
