August WTI crude oil (CLQ24) on Monday closed down -0.30 (-0.36%), and Aug RBOB gasoline (RBQ24) closed down -2.37 (-0.94%).
Crude oil and gasoline prices Monday were under pressure, with gasoline falling to a 4-week low. Weak economic news from China, the world's second-largest crude consumer, weighed on crude prices Monday. Also, improved prospects for Donald Trump to win the US presidential election in November weighed on oil prices due to the expectation that Trump would pursue pro-US drilling policies if elected. In addition, Monday's rally in the S&P 500 to a new record high shows confidence in the US economic outlook that is bullish for energy demand and crude prices.
Lackluster Chinese economic news is negative for energy demand and crude prices. China's Q2 GDP rose +0.6% q/q and +5.0% y/y, weaker than expectations of +0.9% q/q and +5.2% y/y. Also, China's June retail sales rose +2.0% y/y, weaker than expectations of +3.4% y/y and the smallest pace of increase in 14 months. In addition, China's June new home prices fell -0.67% m/m, the thirteenth consecutive month home prices have declined.
Reduced crude exports from Russia limit global oil supplies and support oil prices. According to vessel-tracking data compiled by Bloomberg, Russia's crude exports in the week to July 7 fell by -990,000 bpd to 2.67 million bpd, the lowest in over five months.
Crude oil prices have underlying support from the Hamas-Israel conflict. Israel's military continues to conduct operations in Gaza, and there is the continued risk that the war might spread to Hezbollah in Lebanon or even to a direct conflict with Iran. Meanwhile, ongoing attacks on commercial shipping in the Red Sea by Iran-backed Houthi rebels have forced shippers to divert shipments around the southern tip of Africa instead of going through the Red Sea, disrupting global crude oil supplies.
Higher than expected Russian crude output is bearish for oil prices. Russian crude production averaged 9.078 million bpd in June, above its agreed target of 9.049 million bpd.
A decline in crude oil 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 -20% w/w to 74.53 million bbl as of July 12.
OPEC+ rolled out a plan to restore some crude production in Q4, which sparked worries about a glut in global oil supplies. On June 2, OPEC+ extended the 2 million bpd of voluntary crude production cuts into Q3 but said they would gradually phase out the cuts over the following 12 months, beginning in October. OPEC pledged to extend its crude production cap at about 39 million bpd to the end of 2025. Also, the UAE was given a 300,000 bpd boost to its production target for 2025.
A decrease in OPEC crude output is positive for oil prices. OPEC's June crude production fell -80,000 bpd to 26.98 million bpd.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of July 5 were -4.4% below the seasonal 5-year average, (2) gasoline inventories were -1.1% below the seasonal 5-year average, and (3) distillate inventories were -8.2% below the 5-year seasonal average. US crude oil production in the week ending July 5 rose +0.8% w/w and matched a record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending July 12 fell -1 rig to a 2-1/2 year low of 478 rigs. The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted in December 2022.
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.
