February WTI crude oil (CLG25) Wednesday closed down -0.93 (-1.25%), and February RBOB gasoline (RBG25) closed down -0.0164 (-0.81%).
Crude prices Wednesday fell back from a 3-month high and posted moderate losses. Wednesday's dollar strength was bearish for energy prices. Crude added to its losses Wednesday on a bearish weekly EIA report that showed crude inventories fell less than expected last week and gasoline and distillate supplies rose more than expected.
Wednesday's global economic news was primarily weaker-than-expected and bearish for energy demand and crude prices. The US Dec ADP employment change rose +122,000, weaker than expectations of +140,000. Also, Eurozone Dec economic confidence fell -1.9 to a 15-month low of 93.7, weaker than expectations of 95.6. In addition, German Nov factory orders fell -5.4% m/m, weaker than expectations of -0.2% m/m.
A decline in Russian crude oil exports is supportive of crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -190,000 bpd to 2.88 million bpd in the week to January 5.
Crude prices found support Monday after a Washington Post report said President-elect Trump's aides are weighing a tariff program that would cover only critical imports. If implemented, such a plan would disrupt global trade less than expected, supporting global economic growth and energy demand.
Crude also garnered support Monday after Saudi Arabia raised its crude prices for Asian customers for delivery in February by 60 cents per bbl, above expectations of 10 cents per bbl, and a sign Saudi Arabia sees tighter supplies in its largest crude export market.
A drop in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -33% w/w to 48.02 million bbl in the week ended January 3.
The outlook for new sanctions on Iranian and Russian crude exports could limit global oil supplies and is bullish for prices. Mike Walz, President-elect Trump's pick for national security adviser, vowed a return to "maximum pressure" on Iran, and the Biden administration recently said it is considering new, harsher sanctions on Russian crude oil.
Crude found support last month after OPEC+ pushed back a planned hike of its crude production by +180,000 bpd from January to April and said it would unwind its crude output cuts at a slower pace than planned. Also, the United Arab Emirates (UAE) said it will delay the planned 300,000 bpd increase in its crude production target from January to April. OPEC+ had previously agreed to restore 2.2 million bpd of output in monthly installments between January and late 2025. However, that is now pushed back until September 2026. OPEC Dec crude production fell -120,000 bpd to 27.05 million bpd.
Crude oil demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's Nov apparent oil demand fell -2.14% y/y to 14.013 million bpd, and Jan-Nov apparent oil demand was down -3.26% y/y to 13.996 million bpd. China is the world's second-largest crude consumer.
Wednesday's weekly EIA report was mostly bearish. EIA crude inventories fell -959,000 bbl, a slightly smaller draw than expectations of -2.0 million bbl. Also, EIA gasoline supplies rose +6.3 million bbl to a 10-month high, a larger build than expectations of +500,000 bbl. In addition, EIA distillate stockpiles rose +6.1 million bbl to an 11-month high, a larger build than expectations of +500,000 bbl. On the bullish side, crude supplies at Cushing, the delivery point of WTI futures, fell -2.5 million bbl to a 10-year low.
Wednesday's EIA report showed that (1) US crude oil inventories as of January 3 were -5.8% below the seasonal 5-year average, (2) gasoline inventories were -1.4% below the seasonal 5-year average, and (3) distillate inventories were -4.8% below the 5-year seasonal average. US crude oil production in the week ending January 3 fell -0.1% w/w to 13.563 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6.
Baker Hughes reported last Friday that active US oil rigs in the week ending January 3 fell -1 to 482 rigs, modestly above the 2-3/4 year low of 477 rigs posted November 29. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
