November WTI crude oil (CLX23) on Thursday closed down -0.58 (-0.69%), and Nov RBOB gasoline (RBX23) closed down -4.51 (-2.04%).
Nov WTI crude oil and gasoline prices Thursday gave up an early advance and closed moderately lower. Crude prices gave up an early rally Thursday as the dollar strengthened and after the weekly EIA crude report showed crude inventories unexpectedly rose and U.S. crude production climbed to a record.
Crude on Thursday initially opened higher on concerns about the Israel-Hamas conflict spreading. Also, comments from Saudi Energy Minister Prince Abdulaziz bin Salman gave crude a boost when he said oil producers will continue to work together and act preemptively to keep the oil market in balance.
Crude prices are supported by concern that the conflict between Israel and Hamas will spread in the Middle East on reports that Israel carried out airstrikes on the main airports in Damascus and Aleppo in Syria.
Stronger-than-expected U.S. economic reports Thursday may prompt the Fed to keep raising interest rates, which is bearish for crude as it may curb economic activity and energy demand. The Sep U.S. CPI rose +3.7% y/y, unchanged from Aug and stronger than expectations of a decline to 3.6% y/y. Also, weekly initial unemployment claims were unchanged at 209,000, showing a slightly stronger labor market than expectations of an increase to 210,000.
Another negative for crude is the possibility of sanctions on Venezuela being lifted, which could put additional crude supplies on the global market after a Bloomberg report said the U.S. would be willing to lift some oil and banking sanctions on Venezuela in exchange for steps to ensure the country holds fair presidential elections next year.
The tightness in the oil market is expected to continue due to the extension of OPEC+ production cuts. Saudi Arabia recently said it would maintain its unilateral crude production cut of 1.0 million bpd through December. The move will hold Saudi Arabia's crude output at about 9 million bpd, the lowest level in three years. Russia also recently announced that it would maintain its 300,000 bpd cut in crude production through December. Saudi Arabia and Russia on Wednesday announced that they will retain their crude production cuts until the end of the year. OPEC Sep crude production was little changed, rising +50,000 bpd to 27.97 million bpd.
A decline in crude 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 -15% w/w to 70.04 million bbl as of Oct 6, the lowest in 10 months.
Thursday's weekly EIA crude report was mixed for crude and products. On the bearish side, EIA crude inventories unexpectedly rose +10.18 million bbl versus expectations of a -1.4 million bbl draw. Also, U.S crude production in the week ended Oct 6 rose +2.3% w/w to a record 13.2 million bpd. On the bullish side, EIA gasoline supplies fell -1.3 million bbl, a larger draw than expectations of -1.0 million bbl. Also, EIA distillate stockpiles fell -1.8 million bbl, a bigger draw than expectations of -1.0 million bbl. In addition, crude supplies at Cushing, the delivery point of WTI futures, fell 319,000 bbl to a 15-month low.
Thursday's EIA report showed that (1) U.S. crude oil inventories as of Oct 6 were -3.1% below the seasonal 5-year average, (2) gasoline inventories were +0.2% above 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 Oct 6 rose +2.3% w/w to a record high of 13.2 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended Oct 6 fell by -5 to a 20-month low of 497 rigs. That is well below the 3-1/4 year high of 627 rigs posted on Dec 2, 2022. Still, U.S. active oil rigs have roughly tripled from the 18-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity from pandemic lows.
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.
