June WTI crude oil (CLM23) this morning is down -0.76 (-1.05%), and June RBOB gasoline (RBM23) is down -2.94 (-1.18%). June Nymex natural gas (NGM23) is up +0.058 (+2.65%).
Crude oil and gasoline prices this morning are moderately lower. A rally in today's dollar index to a 1-week high is undercutting energy prices. Also, demand concerns are weighing on crude prices as today's weaker-than-expected economic news from China and the U.S., the world's two biggest crude consumers, sparked fears about a slowdown in the global economy that is bearish for energy demand.
Jun nat-gas this morning is moderately higher after weekly EIA nat-gas inventories rose less than usual for this time of year. The EIA reported nat-gas inventories rose +78 bcf last week, right on the consensus but below the 5-year average for this time of year of +87 bcf. Nat-gas prices also rose as forecasts for abnormally hot conditions for the western U.S. from May 15-19 may boost nat-gas demand from electricity providers to power increased air conditioning.
Today's economic news shows signs of weakness in the U.S. and China that is bearish for energy demand and crude prices. U.S. weekly initial unemployment claims rose +22,000 to a 1-1/2 year high of 264,000, showing a weaker labor market than expectations of 245,000. Also, China's Apr aggregate financing, the broadest measure of credit growth, rose +1.22 trillion yuan, weaker than expectations of +2.0 trillion yuan and the smallest increase in 6 months.
Strength in fuel demand in India, the world's third-largest crude consumer, is bullish for prices after India's Apr diesel consumption jumped +8.6% y/y to a record 7.82 MMT.
Crude has support on a reduction of Canadian crude output after wildfires in Alberta halted about 145,000 bpd of crude production from several Canadian crude producers. However, firefighters are progressing in battling the fires, and crude output should soon resume.
In a bullish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week fell -16% w/w to 78.03 million bbl in the week ended May 5 to the lowest in 3 months.
Signs of stronger Chinese fuel demand are supportive for crude prices after China’s Ministry of Culture and Tourism reported last Thursday that the number of domestic trips made over the five-day Golden Week holidays reached 274 million, up +19% from the pre-pandemic level in 2019 and almost +71% higher than last year.
The ongoing halt of Iraqi crude exports from the Turkish port of Ceyhan is tightening global oil supplies and is bullish for crude prices. The Turkish government said it wants to negotiate a $1.5 billion settlement that it has been ordered to pay before allowing Iraqi crude exports to resume through its pipeline. Oil exports of 400,000 bpd from the Turkish port of Ceyhan have been halted since March 25 after Iraq won an arbitration case from the International Chamber of Commerce that said Turkey violated a 1973 pipeline transit agreement by allowing crude from the Kurdish region to be exported without Iraqi government consent.
Crude oil prices are being undercut by signs that Russia has not delivered on its threat to cut crude output. Tanker-tracking data from Bloomberg shows Russia's crude exports jumped above 4 million bpd in the week of April 28. Russia has halted the publication of crude and condensate production data in an attempt to disguise if it has actually cut crude output.
Crude prices surged on April 3 after OPEC+ announced a surprise oil production cut of more than 1 million bpd starting May 1. Saudi Arabia said the cuts were a "precautionary measure aimed at supporting the stability of the oil market." OPEC Mar crude production fell by -80,000 bpd to 29.16 million bpd.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of May 5 were -1.2% below the seasonal 5-year average, (2) gasoline inventories were -6.8% below the seasonal 5-year average, and (3) distillate inventories were -16.1% below the 5-year seasonal average. U.S. crude oil production in the week ended May 5 was unchanged w/w to 12.3 million bpd, only 0.8 million bpd (-6.1%) 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 May 5 fell -3 to 588 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2. U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
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.
