Sep WTI crude oil (CLU24) today is down -1.29 (-1.65%), and Sep RBOB gasoline (RBU24) is down -0.0200 (-0.82%).
Crude oil prices today are trading lower on this week's theme of weaker global economic growth and US political uncertainty. The markets are also worried on a longer-term basis about OPEC's plan to trim its production cuts in the coming quarters. Crude oil prices are giving back most of the gains seen on Wednesday and Thursday that were driven by a bullish EIA report and Russia's promise of extra production cuts.
Oil prices saw support from Russia's statement on Wednesday that it plans to make additional crude production cuts in October and November 2024, and March-Sep 2025, to offset its above-quota production seen since April. Russia said its recent over-production has ceased and that production in July will match its OPEC+ quota.
Gasoline prices have underlying support as Exxon's Chicago-area refinery is still closed after a tornado last week cut electricity and forced a shutdown of the refinery on July 15. The refinery has capacity of 252,000 barrels/day. The plant regained power on July 23, and repairs are now being made. The company has not yet given a date for a reopening.
Crude has support from wildfires in Canada that threaten to curb Canadian crude production. Rystad Energy said last Friday that 52 out-of-control wildfires in Alberta, Canada, threaten nearly 500,000 bpd of crude oil sands output and pipeline shipments to the US.
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. In June, OPEC crude production fell -80,000 bpd to 26.98 million bpd.
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.
In Wednesday's EIA report, US crude oil inventories in the week ended July 19 fell by -3.74 million bbls, a larger drop than expectations of -3.5 million bbls. Gasoline inventories fell by -5.572 million bbls, the largest drop since March. The EIA report showed that (1) US crude oil inventories as of July 19 were -5.1% below the seasonal 5-year average, (2) gasoline inventories were -1.8% below the seasonal 5-year average, and (3) distillate inventories were -8.6% below the 5-year seasonal average. US crude oil production in the week ending July 19 was unchanged w/w and matched a record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending July 19 fell -1 rig to a 2-1/2 year low of 477 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.
