July WTI crude oil (CLN23) on Wednesday closed up +0.79 (+1.10%), and July RBOB gasoline (RBN23) closed up +7.69 (+3.00%).
Crude oil and gasoline prices Wednesday closed moderately higher. Signs of stronger Chinese crude demand pushed prices higher, as did a jump in U.S refinery runs to a 3-3/4 year high. Also, an unexpected decline in weekly EIA crude inventories was bullish for crude prices.
Chinese crude demand improved last month after China's May crude imports climbed to 12.16 million bpd, up +17% from April.
A bullish factor for crude was today's weekly EIA report that showed the U.S refinery capacity rate rose to a 3-3/4 year high of 95.8% for the week of June 2 as refiners ramp up gasoline production for the upcoming summer driving season, a typically strong time for gasoline consumption
Concerns about a slowdown in the global economy are bearish for energy demand and crude prices after today's economic news showed China May exports fell -7.5% y/y, weaker than expectations of -1.8% y/y and the biggest decline in 4 months.
Strength in the crude crack spread is supportive of crude prices as the crack spread today rose to a 2-week high. The higher spread may prompt refiners to boost their crude purchases and refine the crude into gasoline and distillates.
Crude prices jumped Monday after OPEC+ Sunday 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 4 rose to 3.73 million bpd from a revised 3.68 million bpd in the four-week period to May 28. 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.
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.
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.
Today's weekly EIA report was mixed for crude and products. On the bullish side, EIA crude inventories unexpectedly fell -452,000 bbl versus expectations of a +1.5 million bbl increase. On the bearish side, EIA gasoline supplies rose +2.7 million bbl, above expectations of +1.0 million bbl. Also, distillate stockpiles rose +5.07 million bbl, well above expectations of +1.18 million bbl. In addition, crude supplies at Cushing, the delivery point of WTI futures, rose +1.72 million bbl.
Today's EIA report showed that (1) U.S. crude oil inventories as of June 2 were -2.2% below the seasonal 5-year average, (2) gasoline inventories were -7.5% below the seasonal 5-year average, and (3) distillate inventories were -15.6% below the 5-year seasonal average. U.S. crude oil production in the week ended June 2 rose +1.6% w/w to 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 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.
