August WTI crude oil (CLQ23) this morning is down -1.70 (-2.36%), and Aug RBOB gasoline (RBQ23) is down -8.70 (-3.36%). July Nymex natural gas (NGN23) is down -0.100 (-3.80%).
Crude oil and gasoline prices this morning are moderately lower. A stronger dollar today is bearish for crude prices, along with a selloff in stocks, which weighs on confidence in the economic outlook and energy demand. Also, Chinese energy demand concerns are weighing on crude prices after the China National Petroleum Corp (CNPC) cut its 2023 China crude oil demand estimate.
July nat-gas gave up early gains this morning and turned lower after updated weather forecasts turned cooler for the next week, which would reduce nat-gas demand from electricity providers to power air-conditioning. The Commodity Weather Group said that after peaking in triple digits this week, temperatures in Texas will cool to more seasonal levels next week, and temperatures in the central and eastern U.S. will be near normal.
Crude prices came under pressure this morning after the China National Petroleum Corp (CNPC), China's largest oil and gas producer, cut its 2023 China crude demand estimate. The CNPC forecasts 2023 China crude demand will grow by +3.5% to 740 MMT, down from a March estimate of +5.1% to 756 MMT.
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 earlier this month 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 11 are at 3.63 million bpd, 250,000 bpd higher than they were in the four weeks to Feb 26. 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 bearish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +5% w/w to 107.12 million bbl in the week ended June 16.
Last 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 last 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.
