Nov WTI crude oil (CLX24) Tuesday closed up +1.19 (+1.69%), and Nov RBOB gasoline (RBX24) closed up +3.79 (+1.93%).
Crude oil and gasoline prices Tuesday posted moderate gains, with crude climbing to a 3-week high. Dollar weakness Tuesday was supportive of energy prices. Also, Tuesday's action by China to increase stimulus measures is bullish for crude as the stimulus may spur economic growth that boosts energy demand. In addition, heightened tensions in the Middle East support crude prices.
Crude prices rallied Tuesday after China boosted stimulus measures when the PBOC cut the seven-day reverse repurchase rate by -20 bp to 1.50% from 1.70% and lowered the reserve requirement ratio for large banks by 50 bp to 9.50% from 10.00%, which will boost liquidity in the banking system by 1 trillion yuan ($142 billion). The PBOC also reduced the minimum down payment ratio to 15% for second-home buyers from 25% and announced 500 billion yuan ($71 billion) of liquidity support for stocks with a swap facility allowing securities, funds, and insurance companies to tap the PBOC to buy stocks.
Concerns that conflict in the Middle East may widen and disrupt the region's crude supplies are bullish for crude. Iranian-backed Hezbollah launched a barrage of rockets, missiles, and drones toward northern Israel on Sunday, and Israeli counterattacks in Lebanon on Monday killed more than 500 people, raising fears about a broader conflict that could involve Iran, a major oil producer.
Tuesday's global economic news was mainly weaker than expected and bearish for energy demand and crude prices. The Conference Board US Sep consumer confidence index unexpectedly fell -6.9 to 98.7 versus expectations of an increase to 104.0. Also, the US Sep Richmond Fed manufacturing survey unexpectedly fell -2 to a 4-1/3 year low of -21, weaker than expectations of an increase to -12. In addition, the German Sep IFO business confidence index fell -1.2 to an 8-month low of 85.4, weaker than expectations of 86.0.
A decline in crude oil held worldwide on tankers is bullish for 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 56.31 million bbl in the week ended September 20, the lowest amount in 4-1/2 years.
Crude exports from Libya have recently risen, which boosts global supplies and is negative for prices. Tanker-tracking data compiled by Bloomberg showed Libya's crude shipments averaged 719,000 bpd between September 13-19, more than double the 314,000 bpd in the previous seven days. Earlier this month, Libya's eastern government declared force majeure on all oil fields, terminals, and crude export facilities as it called for a halt to all crude production and exports due to political conflict over who controls the country's central bank and oil revenues.
Crude prices found support after OPEC+ on September 5 agreed to pause its scheduled crude production hike of 180,000 bpd in October and November due to recent weakness in crude prices and signs of fragile global energy demand.
An increase in Russian crude exports is negative for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +110,000 bpd to 3.25 million bpd in the week to September 15. Meanwhile, a decline in Russian crude production is positive for oil prices after Russia's Energy Ministry reported last Tuesday that Russia's Aug crude production was 9.059 million bpd, down -30,000 bpd from July but +81,000 bpd above the output target it agreed to with OPEC+.
The consensus is for Wednesday's weekly EIA crude inventories to fall by -1.43 million bbl and gasoline supplies to climb by +200,000 bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of September 13 were -4.2% below the seasonal 5-year average, (2) gasoline inventories were -0.5% 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 September 13 fell -0.8% w/w to 13.2 million bpd, just below the record high of 13.4 million bpd from the week of August 16.
Baker Hughes reported last Friday that active US oil rigs in the week ending September 20 were unchanged at 488 rigs, modestly above the 2-1/2 year low of 477 rigs posted in the week ending July 19. 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.
