July WTI crude oil (CLN23) on Monday closed up +0.41 (+0.57%), and July RBOB gasoline (RBN23) closed up +2.37 (+0.95%).
Crude oil and gasoline prices Monday posted moderate gains, with crude climbing to a 1-month high. Crude prices rallied Monday after Saudi Arabia said it would cut its crude production by -1.0 million bpd starting in July. However, weaker-than-expected global economic news raised concerns about energy demand, and crude prices fell back from their best levels.
Crude prices jumped Monday after OPEC+ agreed to maintain its crude production levels on Sunday. 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.
Crude prices also garnered support Monday after Saudi Arabia's state-owned Aramco said it would raise oil prices in July for all customers of Arab light crude.
Weaker-than-expected global economic news Monday was bearish for energy demand and crude prices. U.S. Apr factory orders rose +0.4% m/m, weaker than expectations of +0.8% m/m. Also, the U.S. May ISM services index unexpectedly fell -1.6 to a 5-month low of 50.3, weaker than expectations of an increase to 52.4. In addition, the Eurozone May S&P composite PMI was revised downward to 52.8 from the initially reported 53.3. Finally, the Eurozone Jun Sentix investor confidence fell -3.9 to a 5-month low of -17.0, weaker than expectations of -15.1.
OPEC May crude production fell -500,00 bpd to a 16-month low of 28.26 million bpd.
On the negative side, India's Apr crude imports fell -8.3% y/y to 19.8 MMT as processors curbed operating rates amid a drop in petroleum-product exports. India is the world's third-largest crude-consuming country in the world.
In a bearish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +1.8% w/w to 101.46 million bbl in the week ended June 2.
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 May 21 were more than 480,000 bpd higher than during the four weeks to February 26 to nearly 4 million bpd. Crude shipments from Russian ports are +1.2 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.
Last Thursday's EIA report showed that (1) U.S. crude oil inventories as of May 26 were -2.0% below the seasonal 5-year average, (2) gasoline inventories were -7.8% below the seasonal 5-year average, and (3) distillate inventories were -16.6% below the 5-year seasonal average. U.S. crude oil production in the week ended May 26 fell -0.8% w/w to 12.1 million bpd, only 0.9 million bpd (-6.9%) 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 June 2 fell by -15 to a 13-month low of 555 rigs, falling further 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.
