July WTI crude oil (CLN23) on Friday closed up +1.16 (+1.64%), and July RBOB gasoline (RBN23) closed up +3.88 (+1.47%).
Crude oil and gasoline prices Friday moved higher the entire day, with crude posting a 1-week high and gasoline posting a 2-week high. Crude prices rose Friday on hopes that China will boost stimulus measures to spur economic growth and energy demand. Crude extended its gains Friday afternoon when the weekly report from Baker Hughes showed active U.S. oil rigs fell to a 13-1/2 month low.
An increase in U.S. consumer confidence supports energy demand and crude prices after Friday's report showed the University of Michigan's U.S. June consumer sentiment index rose +4.7 to a 4-month high of 63.9, stronger than expectations of 60.0.
Strength in the crude crack spread is bullish for crude prices as the crack spread Friday climbed to a 2-1/2 month high. The stronger crack spread encourages refiners to boost their crude purchases to refine the crude into gasoline and distillates.
Crude prices found support Wednesday after China issued its third batch of crude oil quotas this year, a positive sign for Chinese energy demand. Bloomberg reported that the Chinese government gave refiners an allocation of 62.28 million tons, which took the total quota this year to around 194 million tons, +18% more than the same time last year.
A bearish factor for crude is the weakness in Chinese energy demand, which has resulted in higher Chinese crude oil stockpiles. According to analytics firm Kpler, China's crude oil stockpiles rose to a 2-year high in May of 966 million bbl, well above the five-year average of 858 million bbl.
Crude prices jumped last Monday after OPEC+ on June 4 agreed to maintain its crude production levels. However, Saudi Arabia said it will voluntarily cut its crude output by 1 million bpd starting in July, and Saudi Energy Minister Price Abdulaziz bin Salman said he "will do whatever is necessary to bring stability to the oil market." He also said that next month's additional cuts could be extended, but they will keep the market "in suspense" about whether this will happen. OPEC May crude production fell -500,00 bpd to a 16-month low of 28.26 million bpd.
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 in the four weeks to June 4 rose to 3.73 million bpd from a revised 3.68 million bpd in the four-week period to May 28. Crude shipments from Russian ports are +1.4 million bpd higher than at the end of 2022, with most of the crude going to India and China. Russia has halted the publication of crude and condensate production data in an attempt to disguise if it has actually cut crude output.
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 -4.2% w/w to 101.76 million bbl in the week ended June 9.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of June 9 were -0.6% below the seasonal 5-year average, (2) gasoline inventories were -7.1% below the seasonal 5-year average, and (3) distillate inventories were -14.5% below the 5-year seasonal average. U.S. crude oil production in the week ended June 9 was unchanged w/w at a 3-year high of 12.4 million bpd, only 0.7 million bpd (-5.3%) below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported Friday that active U.S. oil rigs in the week ended June 16 fell by -4 to 552 rigs, a 13-1/2 month low. That is well 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.
