November WTI crude oil (CLX23) on Tuesday closed down -0.41 (-0.47%), and Nov RBOB gasoline (RBX23) closed up +2.03 (+0.91%).
Nov WTI crude oil and gasoline prices on Tuesday settled mixed, with crude giving back some of Monday's surge. Profit-taking emerged in crude Tuesday after the IMF cut its 2024 global GDP forecast to +2.9% from July's forecast of +3.0%. Losses in crude were limited by a weaker dollar and heightened concerns that the conflict between Israel and Hamas may widen and disrupt crude oil supplies from the Middle East. Also, the prospects for additional Chinese stimulus are supportive for energy demand and crude prices.
Crude has support from expectations for additional Chinese stimulus after Bloomberg reported that China is considering raising its budget deficit for 2023 as the government prepares to unleash a new round of stimulus to help the economy reach the government's 5% growth target.
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 -15% w/w to 70.04 million bbl as of Oct 6, the lowest in 10 months.
Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of Sep 29 were -4.5% below the seasonal 5-year average, (2) gasoline inventories were +1.1% above the seasonal 5-year average, and (3) distillate inventories were -12.8% below the 5-year seasonal average. U.S. crude oil production in the week ended Sep 29 was unchanged w/w at 12.9 million bpd, the most in 3-1/2 years. U.S. crude oil production is modestly below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended Oct 6 fell by -5 to a 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.
