December WTI crude oil (CLZ23) today is down -1.74 (-2.04%), and Dec RBOB gasoline (RBZ23) is down -0.0163 (-0.72%).
Crude oil prices are trading lower today on the mildly higher dollar, today's sell-off in stocks, and carry-over from Wednesday's bearish EIA report.
Crude oil prices have underlying support from expectations for an eventual Israeli ground operation in Gaza, which could expand the war to include at least Hezbollah in southern Lebanon. Israeli tanks conducted a limited incursion into Gaza today but then withdrew. The Wall Street Journal reported Wednesday that Israel was delaying its ground invasion of Gaza as the U.S. readied air defenses to protect American troops in the Middle East. Israeli Prime Minister Netanyahu said Wednesday that a ground invasion is coming but he won't explain the reasons for its timing.
An increase in Russian crude exports is bearish for oil prices. Tanker-tracking data monitored by Bloomberg shows 3.53 million bpd of crude was shipped from Russian ports in the week ended Oct 22, an increase of 20,000 bpd from the previous week.
In a bearish factor for crude oil, the U.S. last Wednesday 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 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 -11% w/w to 63.54 million bbl as of Oct 20, the lowest in 3-1/2 years.
Wednesday's weekly EIA report was bearish for crude and products. EIA crude inventories unexpectedly rose +1.37 million bbl versus expectations for a -450,000 bbl draw. Also, EIA gasoline supplies unexpectedly rose +156,000 bbl versus expectations of a -1.27 million bbl draw. In addition, crude supplies at Cushing, the delivery point of WTI futures, rose +213,000 bbl.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Oct 20 were -4.8% below the seasonal 5-year average, (2) gasoline inventories were +1.1% above the seasonal 5-year average, and (3) distillate inventories were -12.9% below the 5-year seasonal average. U.S. crude oil production in the week ended Oct 20 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.
