January WTI crude oil (CLF25) Tuesday closed up +1.84 (+2.70%), and January RBOB gasoline (RBF25) closed up +0.0452 (+2.36%).
Crude oil and gasoline prices on Tuesday pushed moderately higher due to a weaker dollar. Crude extended its gains Tuesday after the US imposed more sanctions on Iranian crude, curbing global oil supplies. Crude also found support after OPEC+ delegates said the group is firming up an agreement to delay its crude production increases for another three months.
Crude oil rallied Tuesday after the US Treasury sanctioned 35 entities and vessels for their role in transporting illicit Iranian oil to foreign markets, which will reduce global crude supplies.
A decline in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -2.5% w/w to 68.74 million bbl in the week ended November 29.
Crude has support from expectations that OPEC+ will delay an expected +180,000 bpd of production from January until Q2 of 2025, when the group meets online on December 5. The group had previously agreed to restore 2.2 million bpd of output in monthly installments between January and late 2025. Also, the UAE is being allowed to gradually phase in a further 300,000 bpd in recognition of recent increases in its production capacity. OPEC Nov crude production rose +120,000 bpd to 27.02 million bpd.
Escalation of the Ukraine-Russian war is supportive of crude prices. Russia launched a new hypersonic missile into the city of Dnipro late last month, following Ukraine's expanded use of Western-provided long-range missiles against targets inside Russia, and Russian President Putin warned that Russia could strike “decision-making centers” in Kyiv with ballistic missiles. Last week, Putin also approved an updated nuclear doctrine that expands the conditions for Russia to use atomic weapons, including in response to a conventional attack on its soil.
Crude demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's Oct apparent oil demand fell -5.4% y/y to 14.07 million bpd, and Jan-Oct apparent oil demand was down -4.03% y/y to 14.00 million bpd. China is the world's second-largest crude consumer.
An increase in Russian crude exports is bearish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +570,000 bpd to 3.36 million bpd in the week to December 1.
The consensus is that Wednesday's weekly EIA crude inventories fell -1.82 million bbl, and gasoline supplies fell -678,000 bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of November 22 were -4.5% below the seasonal 5-year average, (2) gasoline inventories were -3.5% below the seasonal 5-year average, and (3) distillate inventories were -5.1% below the 5-year seasonal average. US crude oil production in the week ending November 22 rose +2.2% w/w to 13.49 million bpd, just below the record 13.50 million bpd from earlier this month.
Baker Hughes reported last Wednesday that active US oil rigs in the week ending November 29 fell -2 rigs and matched the 2-3/4 year low of 477 rigs first posted in the week ending July 19. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
