June WTI crude oil (CLM23) on Thursday closed down -0.04 (-0.06%), and June RBOB gasoline (RBM23) closed up +0.38 (+0.16%).
Crude oil and gasoline prices Thursday settled mixed, with crude falling to a 5-month low. A stronger dollar Thursday weighed on energy prices. Crude oil prices also fell on concern that the ongoing U.S. banking turmoil and the Fed's rate hikes will slow the economy and energy demand. The Fed raised interest rates by 25 bp Wednesday, and the ECB raised rates by +25 bp Thursday and signaled more rate increases are coming. Crude prices rebounded from their worst levels on signs of strength in Chinese fuel demand.
Thursday's global economic news was weaker than expected and was bearish for energy demand. U.S. weekly initial unemployment claims rose +13,000 to 242,000, showing a weaker labor market than expectations of 240,000. Also, the Eurozone Apr composite PMI was revised downward by -0.3 to 54.1 from the initially reported 54.4. In addition, the China Apr Caixin manufacturing PMI fell -0.5 to 49.5, weaker than expectations of no change at 50.0.
Crude oil prices are also 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.
Signs of stronger Chinese fuel demand are supportive for crude prices after China’s Ministry of Culture and Tourism reported 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.
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 -7.2% w/w to 88.87 million bbl in the week ended April 28.
Strength in energy demand in India, the world's third largest crude consumer, is bullish for prices after India's Ministry of Petroleum and Natural Gas reported India's Mar crude processing rose +3.1% y/y to 23 MMT. Also, India's Mar crude imports rose +7.9% y/y to 20.5 MMT.
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 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 April 28 were -1.9% below the seasonal 5-year average, (2) gasoline inventories were -6.2% below the seasonal 5-year average, and (3) distillate inventories were -12.5% below the 5-year seasonal average. U.S. crude oil production in the week ended April 28 rose +0.8% 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 April 28 were unchanged at 591 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.
