November WTI crude oil (CLX23) on Friday closed down -0.62 (-0.69%), and Nov RBOB gasoline (RBX23) closed up +1.19 (+0.50%).
Nov WTI crude oil and gasoline prices Friday settled mixed. Crude prices Friday fell back from a 2-1/2 week high and posted moderate losses after Bloomberg reported that Israel agreed under U.S. pressure to hold off on its land assault of Gaza. Crude also came under pressure after the S&P 500 dropped to a 2-week low, reducing confidence in the economic outlook that is negative for energy demand. Crude prices Friday initially moved higher due to a weaker dollar and concern that an escalation of the Israeli-Hamas conflict could disrupt Middle East oil supplies.
Crude prices are underpinned by concern the conflict between Israel and Hamas may widen to a regional conflict. The U.S. Pentagon said it is seeing an increase in drone attacks in Iraq and Syria against American interests. On Thursday, a U.S. destroyer shot down cruise missiles launched by Yemen-based Houthi militants toward Israel.
Leaders from several states of the Middle East, including Turkey, Saudi Arabia, and Jordan, along with the foreign ministers of France and the UK, are expected to participate in a summit Saturday in Cairo hosted by Egyptian President Abdel-Fatah El-Sisi to discuss the Gaza crisis. China and Germany are also sending envoys to the meeting.
Comments Monday from Iranian Foreign Minister Hossein Amirabdollahian were bullish for crude prices when he said, "Time for political solutions is running out, and the possible expansion of the war to other fronts is approaching the inevitable stage." Iran’s foreign minister has said that Hezbollah militants could open a new front in the Israeli war if the blockade of Gaza and attacks on civilians continue.
A bearish factor for crude oil was the action by the U.S. late Wednesday to 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 will 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. Saudi Arabia and Russia on Wednesday announced that they will retain their crude production cuts until the end of the year. 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 -0.5% w/w to 74.71 million bbl as of Oct 13, the lowest in 10 months.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Oct 13 were -4.8% below the seasonal 5-year average, (2) gasoline inventories were -0.1% below the seasonal 5-year average, and (3) distillate inventories were -13.3% below the 5-year seasonal average. U.S. crude oil production in the week ended Oct 13 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.
